UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to_________
Commission File No. 0-21974
UnitedGlobalCom, Inc.
(Exact name of Registrant as specified in its charter)
State of Delaware 84-1116217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4643 South Ulster Street, #1300
Denver, Colorado 80237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 770-4001
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock as of April
28, 2000 was:
Class A Common Stock -- 76,571,630 shares
Class B Common Stock -- 19,321,940 shares
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UnitedGlobalCom, Inc.
TABLE OF CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
------------------------------
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Item 1 - Financial Statements
- ------
Condensed Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 (Unaudited)................. 3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2000
and 1999 (Unaudited)..................................................................................... 4
Condensed Consolidated Statement of Stockholders' Equity for the Three Months Ended
March 31, 2000 (Unaudited)............................................................................... 5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999
(Unaudited).............................................................................................. 7
Notes to Condensed Consolidated Financial Statements (Unaudited)............................................. 9
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 23
- ------
Item 3 - Quantitative and Qualitative Disclosures about Market Risk............................................. 36
- ------
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings.................................................................................... 40
- ------
Item 6 - Exhibits and Reports on Form 8-K....................................................................... 40
- ------
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2
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
As of As of
March 31, December 31,
2000 1999
ASSETS ------------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents........................................................................... $ 1,581,372 $1,925,915
Restricted cash..................................................................................... 17,284 18,217
Short-term liquid investments....................................................................... 588,211 629,689
Subscriber receivables, net of allowance for doubtful accounts of $39,438 and $27,808,
respectively....................................................................................... 98,515 83,388
Costs to be reimbursed by affiliated companies, net................................................. 9,119 13,430
Other receivables, including related party receivables of $2,551 and $1,680, respectively........... 202,280 131,622
Inventory........................................................................................... 109,069 82,995
Deferred taxes...................................................................................... 2,443 2,119
Other current assets, net........................................................................... 138,328 98,891
----------- ----------
Total current assets........................................................................... 2,746,621 2,986,266
Investments in affiliates, accounted for under the equity method, net................................. 821,236 309,509
Marketable equity securities and other investments.................................................... 12,257 235,917
Property, plant and equipment, net of accumulated depreciation of $580,987 and $482,524,
respectively......................................................................................... 2,786,597 2,379,837
Goodwill and other intangible assets, net of accumulated amortization of $216,803 and $170,133,
respectively......................................................................................... 3,902,656 2,944,802
Deferred financing costs, net of accumulated amortization of $20,142 and $17,062, respectively........ 146,222 130,704
Deferred taxes........................................................................................ 7,627 3,698
Other assets, net..................................................................................... 38,140 12,120
----------- ----------
Total assets................................................................................... $10,461,356 $9,002,853
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable, including related party payables of $1,028 and $390, respectively................. $ 315,996 $ 306,760
Accrued liabilities................................................................................. 388,330 324,431
Subscriber prepayments and deposits................................................................. 88,365 41,466
Short-term debt..................................................................................... 379,361 173,296
Current portion of other long-term debt............................................................ 67,764 52,180
Other current liabilities........................................................................... 16,623 10,567
----------- ----------
Total current liabilities...................................................................... 1,256,439 908,700
Senior discount notes and senior notes................................................................ 5,955,447 4,385,004
Other long-term debt.................................................................................. 1,469,113 1,604,451
Deferred compensation................................................................................. 101,835 54,825
Deferred taxes........................................................................................ 18,324 17,074
Other long-term liabilities........................................................................... 28,062 23,603
----------- ----------
Total liabilities.............................................................................. 8,829,220 6,993,657
----------- ----------
Minority interests in subsidiaries.................................................................... 714,292 867,970
----------- ----------
Series B Convertible Preferred Stock, 3,000,000 shares authorized, stated at
liquidation value, 114,123 and 116,185 shares issued and outstanding, respectively................... 26,872 26,920
----------- ----------
Stockholders' equity:
Class A Common Stock, $0.01 par value, 210,000,000 shares authorized, 81,945,052 and
81,574,815 shares issued and outstanding, respectively............................................... 820 816
Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 19,321,940 and 19,323,940
shares issued and outstanding, respectively.......................................................... 193 193
Series C Convertible Preferred Stock, 425,000 shares authorized, issued and outstanding............... 417,563 410,125
Series D Convertible Preferred Stock, 287,500 shares authorized, issued and outstanding............... 273,804 268,773
Additional paid-in capital............................................................................ 1,522,383 1,416,635
Deferred compensation................................................................................. (181,011) (119,996)
Treasury stock, at cost, 5,569,240 shares of Class A Common Stock..................................... (29,061) (29,061)
Accumulated deficit................................................................................... (879,348) (621,941)
Other cumulative comprehensive loss................................................................... (234,371) (211,238)
----------- ----------
Total stockholders' equity............................................................................ 890,972 1,114,306
----------- ----------
Total liabilities and stockholders' equity............................................................ $10,461,356 $9,002,853
=========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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3
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)
(Unaudited)
For the Three Months Ended
March 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue...................................................................................... $ 281,856 $ 107,918
System operating expense..................................................................... (190,178) (55,165)
System selling, general and administrative expense........................................... (143,581) (41,590)
Corporate general and administrative expense................................................. (72,583) (26,082)
Depreciation and amortization................................................................ (172,098) (57,398)
---------- ----------
Operating loss.......................................................................... (296,584) (72,317)
Gain on issuance of common equity securities by subsidiaries................................. 77,109 825,196
Interest income, including related party income of $140 and $138, respectively............... 55,502 3,910
Interest expense............................................................................. (215,581) (56,623)
Gain on sale of investments in affiliates.................................................... - 7,456
Foreign currency exchange loss............................................................... (62,886) (5,490)
Other expense, net........................................................................... (8,012) (5,787)
---------- ----------
(Loss) income before other items........................................................ (450,452) 696,345
Income tax benefit (expense)................................................................. 664 (188)
Minority interests in subsidiaries........................................................... 227,109 12,756
Share in results of affiliates, net.......................................................... (22,259) (20,562)
---------- ----------
Net (loss) income....................................................................... $ (244,938) $ 688,351
========== ==========
Foreign currency translation adjustments..................................................... $ (23,149) $ (62,897)
Unrealized holding gains (losses) arising during priod....................................... 16 (97)
---------- ----------
Comprehensive (loss) income............................................................. $ (268,071) $ 625,357
========== ==========
Basic net (loss) income attributable to common shareholders (Note 12)........................ $ (257,845) $ 687,698
========== ==========
Diluted net (loss) income attributable to common shareholders (Note 12)...................... $ (257,845) $ 688,351
========== ==========
Net (loss) income per common share:
Basic net (loss) income................................................................. $ (2.70) $ 8.82
========== ==========
Diluted net (loss) income............................................................... $ (2.70) $ 8.17
========== ==========
Weighted-average number of common shares outstanding:
Basic................................................................................... 95,529,552 77,935,846
========== ==========
Diluted................................................................................. 95,529,552 84,254,290
========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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4
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Stated in thousands, except share amounts)
(Unaudited)
Class A Class B Series C Series D
Common Stock Common Stock Preferred Stock Preferred Stock Additional
---------------- ---------------- ------------------ ------------------ Paid-In Deferred
Shares Amount Shares Amount Shares Amount Shares Amount Capital Compensation
--------- ------ --------- ------ --------- -------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1999...... 81,574,815 $816 19,323,940 $193 425,000 $410,125 287,500 $268,773 $1,416,635 $(119,996)
Exchange of Class B Common Stock
for Class A Common Stock........ 2,000 - (2,000) - - - - - - -
Issuance of Class A Common Stock
in connection with Company's
stock option plans.............. 322,470 3 - - - - - - 2,534 -
Exchange of Series B
Convertible Preferred Stock
for Class A Common Stock........ 45,767 1 - - - - - - 486 -
Accrual of dividends on
Series B, C and D
Convertible Preferred Stock..... - - - - - 7,438 - 5,031 (438) -
Equity transactions of
subsidiaries.................... - - - - - - - - 103,166 (75,653)
Amortization of deferred
compensation.................... - - - - - - - - - 14,638
Net loss......................... - - - - - - - - - -
Change in cumulative
translation adjustments......... - - - - - - - - - -
Change in unrealized gain
on available-for-sale
securites....................... - - - - - - - - - -
---------- ---- ---------- ---- ------- -------- ------- -------- ---------- ---------
Balances, March 31, 2000......... 81,945,052 $820 19,321,940 $193 425,000 $417,563 287,500 $273,804 $1,522,383 $(181,011)
========== ==== ========== ==== ======= ======== ======= ======== ========== =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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5
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Continued)
(Stated in thousands, except share amounts)
(Unaudited)
Treasury Stock Cumulative
------------------- Accumulated Comprehensive
Shares Amount Deficit Loss Total
--------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1999...... 5,569,240 $(29,061) $(621,941) $(211,238) $1,114,306
Exchange of Class B Common Stock
for Class A Common Stock........ - - - - -
Issuance of Class A Common Stock
in connection with Company's
stock option plans.............. - - - - 2,537
Exchange of Series B
Convertible Preferred Stock
for Class A Common Stock........ - - - - 487
Accrual of dividends on
Series B, C and D
Convertible Preferred Stock..... - - (12,469) - (438)
Equity transactions of
subsidiaries.................... - - - - 27,513
Amortization of deferred
compensation.................... - - - - 14,638
Net loss......................... - - (244,938) - (244,938)
Change in cumulative
translation adjustments......... - - - (23,149) (23,149)
Change in unrealized gain
on available-for-sale
securites....................... - - - 16 16
--------- -------- --------- --------- ----------
Balances, March 31, 2000......... 5,569,240 $(29,061) $(879,348) $(234,371) $ 890,972
=== ===== ========= ======== ========= ========= ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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6
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
(Unaudited)
For the Three Months Ended
March 31,
---------------------------
2000 1999
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income................................................................................ $ (244,938) $ 688,351
Adjustments to reconcile net income to net cash flows from operating activities:
Gain on issuance of common equity securities by subsidiaries................................... (77,109) (825,196)
Share in results of affiliates, net............................................................ 20,238 17,488
Minority interests in subsidiaries............................................................. (227,109) (12,756)
Depreciation and amortization.................................................................. 172,098 57,398
Accretion of interest on senior notes and amortization of deferred financing costs............. 104,347 39,487
Stock-based compensation expense............................................................... 68,460 18,640
Gain on sale of investments in affiliates...................................................... - (7,456)
Increase in receivables, net................................................................... (42,074) (17,571)
Increase in other assets....................................................................... (27,618) (3,686)
Increase in accounts payable, accrued liabilities and other.................................... 213,670 53,689
---------- ---------
Net cash flows from operating activities.................................................... (40,035) 8,388
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments........................................................ (817,507) (40,969)
Proceeds from sale of short-term liquid investments.............................................. 795,602 35,325
Restricted cash released (deposited), net........................................................ 167 (26,670)
Investments in affiliates and other investments.................................................. (304,675) (12,556)
Proceeds from sale of investments in affiliated companies........................................ - 18,704
New acquisitions, net of cash acquired........................................................... (1,341,400) (252,043)
Capital expenditures............................................................................. (300,559) (91,990)
Other............................................................................................ 48,725 1,167
---------- ---------
Net cash flows from investing activities.................................................... (1,919,647) (369,032)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock by subsidiaries......................................................... - 1,414,001
Issuance of common stock in connection with Company's and subsidiary's stock option plans........ 6,492 16,832
Issuance of common stock in connection with exercise of warrants................................. - 13,934
Proceeds from offering of senior notes and senior discount notes................................. 1,612,200 -
Retirement of existing senior notes.............................................................. - (265)
Proceeds from short-term and long-term borrowings................................................ 423,936 413,313
Deferred financing costs......................................................................... (31,390) (5,260)
Repayments of short-term and long-term borrowings................................................ (293,802) (875,666)
Payment of sellers notes......................................................................... - (18,537)
---------- ---------
Net cash flows from financing activities.................................................... 1,717,436 958,352
---------- ---------
EFFECT OF EXCHANGE RATES ON CASH................................................................. (102,297) (25,826)
---------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................................................. (344,543) 571,882
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................................... 1,925,915 35,608
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD......................................................... $1,581,372 $ 607,490
========== =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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7
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
(Unaudited)
For the Three Months Ended
March 31,
---------------------------
2000 1999
----------- ----------
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SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest......................................................................... $ 124,333 $ 31,998
=========== =========
Cash received for interest..................................................................... $ 60,025 $ 3,298
=========== =========
Acquisition of K&T Group:
Property, plant and equipment.................................................................. $ (227,845) $ -
Investments in affiliated companies............................................................ (8,430) -
Goodwill....................................................................................... (790,698) -
Long-term liabilities.......................................................................... 225,439 -
Net current liabilities........................................................................ 8,129 -
Receivables acquired........................................................................... (212,642) -
----------- ---------
Net cash paid............................................................................... $(1,006,047) $ -
=========== =========
Acquisition of remaining 49.0% of Dutch joint venture:
Property, plant and equipment.................................................................. $ - $(179,131)
Investments in affiliated companies............................................................ - (46,830)
Goodwill....................................................................................... - (287,631)
Long-term liabilities.......................................................................... - 242,536
Net current liabilities........................................................................ - 5,384
----------- ---------
Total cash paid............................................................................. - (265,672)
Cash acquired.................................................................................. - 13,629
----------- ---------
Net cash paid............................................................................... $ - $(252,043)
=========== =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
(Unaudited)
1. ORGANIZATION AND NATURE OF OPERATIONS
UnitedGlobalCom, Inc. (together with its majority-owned subsidiaries, the
"Company" or "United") was formed as a Delaware corporation in May 1989, for the
purpose of developing, acquiring and managing foreign multi-channel television,
programming and telephone operations outside the United States. The following
chart presents a summary of the Company's significant investments in
telecommunications as of March 31, 2000.
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<S> <C>
************************************************************************************************************************************
* United *
************************************************************************************************************************************
100.0% * 100.0% *
*************************************** *******************************************************************************************
* United Europe, Inc. ("UEI") * * United International Properties, Inc. ("UIPI") *
*************************************** *******************************************************************************************
* *
* **********************************************
53.0% * 100.0% * * 100.0%
*************************************** ********************************************* *********************************************
* United Pan-Europe Communications * * United Asia/Pacific Communications, Inc. * * United Latin America, Inc. *
* N.V. ("UPC") * * ("UAP")* * * ("ULA") *
*************************************** ********************************************* *********************************************
* 100.0% * *
*************************************** ********************************************* *********************************************
*Austria: * * United Australia/Pacific, Inc. * *Brazil: *
* Telekabel Group 95.0% * * ("United A/P") * * TV Show Brasil 100.0% *
*Belgium: * ********************************************* * Jundiai 46.3% *
* UPC Belgium 100.0% * * *Chile: *
*Czech Republic: * 72.3% * * VTR 100.0% *
* Kabel Net 100.0% * ********************************************* *Mexico: *
* Kabel Plus 100.0% * * Austar United Communications Limited * * Megapo 90.3% *
*France: * * ("Austar United") * *Peru: *
* UPC France(1) 92.0% * ********************************************* * Cable Star 62.2% *
*Germany: * * *Latin American Programming: *
* PrimaCom 25.1% * * * MGM Networks LA 50.0% *
*Hungary: * ********************************************* *********************************************
* UPC Magyarorszag 100.0% * *Australia: *
* Monor 97.1% * * Austar 100.0% *
*Ireland: * * XYZ Entertainment 50.0% *
* Tara 80.0% * *New Zealand: *
*Israel: * * Saturn 100.0% *
* Tevel 46.6% * *********************************************
*Malta: *
* Melita 50.0% * *********************************************
*The Netherlands: * * *Other UAP *
* UPC Netherland(2) 100.0% * * *
*Norway: * *China: *
* UPC Norge 100.0% * * Hunan International TV 49.0% *
* El Tele Ostfold 100.0% * *Philippines: *
*Poland: * * Pilipino Cable Corporation 19.6% *
* @Entertainment 100.0% * *********************************************
*Romania: *
* UPC Romania 51.0%-100.0% *
*Slovak Republic: *
* UPC Solvak 95.0%-100.0% *
*Spain/Portugal: *
* Iberian Programming 50.0% *
* Munditelecom 51.0% *
*Sweden: *
* Stjarn 100.0% *
*United Kingdom: *
* Xtra Music 41.0% *
*Other Business Lines: *
* SBS 23.5% *
* Priority Telecom 100.0% *
* chello broadband 100.0% *
* UPCtv 100.0% *
***************************************
</TABLE>
(1) The investments in Mediareseaux, Videopole, Time Warner Cable France, RCF
and Intercomm are held through UPC France.
(2) The investments in GelreVision, A2000, K&T Group, Tebecai and Haarlem are
held through UPC Nederland.
9
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UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying interim condensed consolidated financial statements are
unaudited and include the accounts of the Company and all subsidiaries where it
exercises a controlling financial interest through the ownership of a majority
voting interest. The following illustrates those subsidiaries for which the
Company did not consolidate the results of operations for the entire three
months ended March 31, 2000 and/or March 31, 1999:
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Effective Date
Entity of Consolidation Reason
- ------ ---------------- ------
<S> <C> <C>
UPC Nederland(1) February 1, 1999 Acquisition of remaining 49.0% interest in
United Telekabel Holding N.V. ( "UTH ")
VTR May 1, 1999 Acquisition of remaining 66.0% interest
UPC Slovensko (Slovak Republic) June 1, 1999 Acquisition
GelreVision (The Netherlands) June 1, 1999 Acquisition
Reseaux Cables de France ( "RCF ") June 1, 1999 Acquisition
Saturn (1) August 1, 1999 Acquisition of remaining 35.0% interest
Stjarn August 1, 1999 Acquisition
Videopole (France) August 1, 1999 Acquisition
@Entertainment August 1, 1999 Acquisition
Time Warner Cable France September 1, 1999 Acquisition
A2000 (The Netherlands) September 1, 1999 Acquisition of remaining 50.0% interest
Kabel Plus October 1, 1999 Acquisition
Monor December 1, 1999 Acquisition
Intercomm France Holding S.A. March 1, 2000 Acquisition of 92.0% interest
Tebecai February 1, 2000 Acquisition
El Tele Ostfold and Vestfold March 1, 2000 Acquisition
K&T Group March 31, 2000 Acquisition
</TABLE>
- --------------------
(1) Prior to the acquisition date, the equity method of accounting was used
because of certain minority shareholder's rights.
In management's opinion, all adjustments (of a normal recurring nature) have
been made which are necessary to present fairly the financial position of the
Company as of March 31, 2000 and the results of its operations for the three
months ended March 31, 2000 and 1999. All significant intercompany accounts and
transactions have been eliminated in consolidation. For a more complete
understanding of the Company's financial position and results of operations, see
the consolidated financial statements of the Company included in the Company's
annual report on Form 10-K for the year ended December 31, 1999.
10
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UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
INVESTMENTS IN AFFILIATES, ACCOUNTED FOR UNDER THE EQUITY METHOD
For those investments in unconsolidated subsidiaries and companies in which the
Company's voting interest is 20.0% to 50.0%, its investments are held through a
combination of voting common stock, preferred stock, debentures or convertible
debt and/or the Company exerts significant influence through board
representation and management authority, the equity method of accounting is
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's proportionate share of net earnings or
losses of the affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, including any debt guarantees or other
contractual funding commitments. The Company's proportionate share of net
earnings or losses of affiliates includes the amortization of the excess of its
cost over its proportionate interest in each affiliate's net assets.
MARKETABLE EQUITY SECURITIES AND OTHER INVESTMENTS
The cost method of accounting is used for the Company's other investments in
affiliates in which the Company's ownership interest is less than 20.0% and
where the Company does not exert significant influence, except for those
investments in marketable equity securities. The Company classifies its
investments in marketable equity securities in which its interest is less than
20.0% and where the Company does not exert significant influence as
available-for-sale and reports such investments at fair market value. Unrealized
gains and losses are charged or credited to equity, and realized gains and
losses and other-than-temporary declines in market value are included in
operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for normal
repair and maintenance of property, plant and equipment are charged to expense
as incurred. Assets constructed incorporate overhead expense and interest
charges incurred during the period of construction; investment subsidies are
deducted. Upon disconnection of a subscriber, the remaining book value of the
subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are written off and accounted for as an
operating cost. Depreciation is calculated using the straight-line method over
the economic life of the asset.
The economic lives of property, plant and equipment at acquisition are as
follows:
Cable distribution networks.................... 3-20 years
Subscriber premises equipment and converters... 3-10 years
MMDS/DTH distribution facilities............... 5-20 years
Office equipment, furniture and fixtures....... 3-10 years
Buildings and leasehold improvements........... 3-33 years
Other.......................................... 3-10 years
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15 years.
Licenses in newly-acquired companies are recognized at the fair market value of
those licenses at the date of acquisition. Licenses in new franchise areas
include the capitalization of direct costs incurred in obtaining the license.
The license value is amortized on a straight-line basis over the initial license
period, up to a maximum of 20 years.
DEFERRED FINANCING COSTS
Costs to obtain debt financing are capitalized and amortized over the life of
the debt facility using the effective interest method.
SUBSCRIBER PREPAYMENTS AND DEPOSITS
Payments received in advance for multi-channel television service are deferred
and recognized as revenue when the associated services are provided. Deposits
are recorded as a liability upon receipt and refunded to the subscriber upon
disconnection.
11
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UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
REVENUE RECOGNITION
Revenue is primarily derived from the sale of multi-channel television,
telephone and Internet/data services to subscribers and is recognized in the
period the related services are provided. Initial installation fees are
recognized as revenue in the period in which the installation occurs, to the
extent installation fees are equal to or less than direct selling costs, which
are expensed. To the extent installation fees exceed direct selling costs, the
excess fees are deferred and amortized over the average contract period. All
installation fees and related costs with respect to reconnections and
disconnections are recognized in the period in which the reconnection or
disconnection occurs because reconnection fees are charged at a level equal to
or less than related reconnection costs.
STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY
Gains realized as a result of stock sales by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which must
be credited directly to equity in accordance with the provisions of SAB 51.
STOCK-BASED COMPENSATION
Stock-based compensation is recognized using the intrinsic value method for the
Company's stock option plans, which results in compensation expense for the
difference between the grant price and the fair market value at each new
measurement date. In addition to the Company's stock option plans, UPC, chello
broadband, ULA, VTR and Austar United have also adopted stock-based compensation
plans for their employees. With respect to certain of these plans, the rights
conveyed to employees are the substantive equivalents to stock appreciation
rights. Accordingly, compensation expense is recognized at each financial
statement date based on the difference between the grant price and the estimated
fair value of the respective subsidiary's common stock.
BASIC AND DILUTED NET (LOSS) INCOME PER SHARE
"Basic net (loss) income per share" is determined by dividing net (loss) income
available to common stockholders by the weighted-average number of common shares
outstanding during each period. Net (loss) income available to common
stockholders includes the accrual of dividends on convertible preferred stock
which is charged directly to additional paid-in capital. "Diluted net (loss)
income per share" includes the effects of potentially issuable common stock, but
only if dilutive. On November 11, 1999, the Board of Directors authorized a
two-for-one stock split effected in the form of a stock dividend distributed on
November 30, 1999 to stockholders of record on November 22, 1999. All historical
weighted average share and per share amounts have been restated to reflect the
stock split.
FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK
The functional currency for the Company's foreign operations is the applicable
local currency for each affiliate company, except for countries which have
experienced hyper-inflationary economies. For countries which have
hyper-inflationary economies, the financial statements are prepared in U.S.
dollars. Assets and liabilities of foreign subsidiaries for which the functional
currency is the local currency are translated at exchange rates in effect at
period-end, and the statements of operations are translated at the average
exchange rates during the period. Exchange rate fluctuations on translating
foreign currency financial statements into U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments.
Cumulative translation adjustments are recorded as a separate component of
stockholders' equity and are included in Other Cumulative Comprehensive Loss.
Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in exchange rates result in transaction gains and losses which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions. Cash flows from the Company's operations in
foreign countries are translated based on their functional currencies. As a
result, amounts related to assets and liabilities reported in the consolidated
statements of cash flows will not agree to changes in the corresponding balances
in the consolidated balance sheets. The effects of exchange rate changes on cash
balances held in foreign currencies are reported as a separate line below cash
flows from financing activities.
Certain of the Company's foreign operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. Accordingly, the Company may experience economic loss and a
negative impact on earnings and equity with respect to its holdings solely as a
result of foreign currency exchange rate fluctuations.
12
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NEW ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133, accounting for changes in fair value of a derivative depends on
its intended use and designation. SFAS 133 is effective for fiscal years
beginning after June 15, 2000. The Company is currently assessing the effect of
this new standard.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Views on Selected Revenue Recognition
Issues" ("SAB 101"), which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB 101
is effective for the second quarter of 2000. The Company is currently assessing
the effect of SAB 101.
3. ACQUISITIONS AND OTHER
ACQUISITION OF INTERCOMM FRANCE HOLDING S.A.
In February 2000, UPC acquired Intercomm France Holding S.A. for euro36.0
($35.6) million in cash and shares in UPC France. Following the transaction, UPC
controls 92.0% of UPC France. In connection with this acquisition, UPC issued
shares worth euro20.2 ($20.0) million. Based on the carrying value of United's
investment in UPC as of February 23, 2000, United recognized a gain of $10.3
million from the resulting step-up in the carrying amount of United's investment
in UPC, in accordance with SAB 51.
ACQUISITION OF TEBECAI
In February 2000, UPC acquired 100% of Tebecai, a cable system based in the east
of The Netherlands, for euro71.2 ($70.4) million.
ACQUISITION OF ADDITIONAL INTEREST IN SBS
In February 2000, UPC acquired an additional 10.2% of SBS for euro162.5 ($160.6)
million, increasing its ownership to 23.5%.
ACQUISITION OF EL TELE OSTFOLD AND VESTFOLD
In February 2000, UPC acquired 100% of the equity of El Tele Ostfold and
Vestfold from certain energy companies in Norway for euro39.7 ($39.2) million.
ACQUISITION OF KABEL HAARLEM
In March 2000, UPC acquired 100% of Kabel Haarlem in The Netherlands for
euro62.2 ($59.8) million.
ACQUISITION OF K&T GROUP
In March 2000, UPC acquired K&T Group, the cable interests of N.V. ENECO, for
consideration of euro1.0 ($1.0) billion. K&T owns and operates cable networks in
Rotterdam, Dordrecht and the surrounding municipalities in The Netherlands.
AUSTAR UNITED SECOND PUBLIC OFFERING
On March 29, 2000, Austar United announced the sale of 20.0 million shares to
the public at A$8.50 ($5.20) per share for gross and net proceeds of A$170.0
($104.0) million and A$167.5 ($102.4) million, respectively. Based on the
carrying value of the Company's investment in Austar United as of March 29,
2000, United recognized a gain of $66.8 million from the resulting step-up in
the carrying amount of United's investment in Austar United, in accordance with
SAB 51. No deferred taxes were recorded related to this gain due to the
Company's intent on holding its investment in Austar United indefinitely. This
offering reduced the Company's ownership interest from 75.4% to approximately
72.3%.
13
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. INVESTMENTS IN AFFILIATES, ACCOUNTED FOR UNDER THE EQUITY METHOD
<TABLE>
<CAPTION>
As of March 31, 2000
--------------------------------------------------------------------------------
Cumulative Cumulative
Investments in Dividends Share in Results Translation
Affiliates Received of Affiliates Adjustments Total
--------------- ----------- ---------------- ------------ ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Europe:
SBS............................... $264,186 $ - $(12,423) $ 1,964 $253,727
Tevel............................. 99,385 (6,180) (18,490) 5,218 79,933
Melita............................ 14,062 - 1,802 (2,842) 13,022
Iberian Programming............... 11,947 - 2,854 868 15,669
Xtra Music........................ 10,945 - (3,736) (309) 6,900
PrimaCom.......................... 340,664 - (5,738) (9,049) 325,877
Other............................. 41,780 - (2,163) (868) 38,749
Asia/Pacific:
XYZ Entertainment................. 44,306 (1,576) (17,520) 692 25,902
Pilipino Cable Corporation........ 15,836 - (3,026) (2,588) 10,222
Hunan International TV............ 6,061 - (2,384) 16 3,693
Other............................. 3,279 - 34 (108) 3,205
Latin America:
Megapo............................ 71,746 (20,862) (1,713) (8,317) 40,854
MGM Networks LA (1)............... 12,837 - (12,837) - -
Jundiai........................... 6,032 (1,572) 162 (1,141) 3,481
Other............................. 2 - - - 2
-------- -------- -------- -------- --------
Total........................... $943,068 $(30,190) $(75,178) $(16,464) $821,236
======== ======== ======== ======== ========
As of December 31, 1999
--------------------------------------------------------------------------------
Cumulative Cumulative
Investments in Dividends Share in Results Translation
Affiliates Received of Affiliates Adjustments Total
--------------- ----------- ---------------- ------------ ---------
Europe:
SBS............................... $ 99,621 $ - $ (5,421) $ 2,858 $ 97,058
Tevel............................. 100,679 (6,180) (12,108) 3,761 86,152
Melita............................ 14,062 - 2,066 (2,417) 13,711
Iberian Programming............... 11,947 - (460) 2,828 14,315
Xtra Music........................ 9,913 - (2,476) (640) 6,797
Other............................. 27,447 - (65) (1,048) 26,334
Asia/Pacific:
XYZ Entertainment................. 44,306 - (18,564) 2,804 28,546
Pilipino Cable Corporation........ 14,950 - (3,004) (2,588) 9,358
Hunan International TV............ 6,061 - (2,477) 16 3,600
Other............................. 350 - - - 350
Latin America:
Megapo............................ 32,496 (1,408) (1,618) (9,382) 20,088
MGM Networks LA (1)............... 11,988 - (11,988) - -
Jundiai........................... 6,032 (1,572) 72 (1,334) 3,198
Other............................. 2 - - - 2
-------- -------- -------- -------- --------
Total........................... $379,854 $ (9,160) $(56,043) $ (5,142) $309,509
======== ======== ======== ======== ========
</TABLE>
(1) Includes an accrued funding obligation of $3.9 and $3.0 million at March
31, 2000 and December 31, 1999, respectively. The Company would face
significant and punitive dilution if it did not make the requested
fundings.
14
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
5. PROPERTY, PLANT AND EQUIPMENT As of As of
March 31, December 31,
2000 1999
-------------- ------------
(In thousands)
<S> <C> <C>
Cable distribution networks...................................................... $2,274,411 $1,826,781
Subscriber premises equipment and converters..................................... 447,421 451,505
MMDS/DTH distribution facilities................................................. 161,322 144,593
Office equipment, furniture and fixtures......................................... 152,225 103,869
Buildings and leasehold improvements............................................. 183,964 162,522
Other............................................................................ 148,241 173,091
---------- ----------
3,367,584 2,862,361
Accumulated depreciation.................................................... (580,987) (482,524)
---------- ----------
Net property, plant and equipment........................................... $2,786,597 $2,379,837
========== ==========
6. GOODWILL AND OTHER INTANGIBLE ASSETS As of As of
March 31, December 31,
2000 1999
-------------- ------------
Europe: (In thousands)
@Entertainment................................................................. $ 935,778 $ 935,867
UPC Nederland.................................................................. 1,603,679 763,714
Stjarn......................................................................... 424,583 430,606
Telekabel Group................................................................ 169,893 177,800
UPC France..................................................................... 162,101 117,787
UPC Norge...................................................................... 81,610 85,405
Kabel Plus..................................................................... 85,327 85,330
UPC Magyarorszag............................................................... 108,086 55,068
UPC............................................................................ 83,919 29,406
Monor.......................................................................... 23,335 24,420
UPC Slovak..................................................................... 22,390 23,026
UPC Belgium.................................................................... 20,280 20,994
El Tele Ostfold................................................................ 26,842 -
Other.......................................................................... 14,549 12,932
Asia/Pacific:
Austar United.................................................................. 106,925 114,882
Latin America:
VTR............................................................................ 235,549 223,484
TV Show Brasil................................................................. 8,648 8,298
Cable Star..................................................................... 5,965 5,916
---------- ----------
4,119,459 3,114,935
Accumulated amortization.................................................... (216,803) (170,133)
---------- ----------
Net goodwill and other intangible assets.................................... $3,902,656 $2,944,802
========== ==========
7. SHORT-TERM DEBT As of As of
March 31, December 31,
2000 1999
-------------- ------------
(In thousands)
UPC facilities................................................................... $ 367,999 $ 164,263
Other Latin America and Asia/Pacific............................................. 11,362 9,033
---------- ----------
Total short-term debt....................................................... $ 379,361 $ 173,296
========== ==========
</TABLE>
15
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A2000 FACILITY REFINANCING
In January 2000, A2000, a wholly-owned subsidiary of UPC Nederland, refinanced
its existing bank facilities with a one year term loan bridge facility of
euro231.4 ($222.5) million and a one year revolving bridge facility of euro49.9
($48.0) million, subject to certain availability covenants. These facilities
bear interest at EURIBOR plus 1.0%, and expire in December 2000.
8. SENIOR DISCOUNT NOTES AND SENIOR NOTES
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
2000 1999
------------- -------------
(In thousands)
<S> <C> <C>
United 1998 Notes................................................................ $1,017,868 $ 991,568
United 1999 Notes................................................................ 230,419 224,426
UPC USD Senior Notes due 2009.................................................... 725,689 759,442
UPC 10.875% Euro Senior Notes due 2009........................................... 288,462 301,878
UPC USD Senior Discount Notes due 2009........................................... 434,443 421,747
UPC 10.875% USD Senior Notes due 2007............................................ 183,325 191,852
UPC 10.875% Euro Senior Notes due 2007........................................... 96,154 100,625
UPC 11.25% USD Senior Notes due 2009............................................. 229,209 239,905
UPC 11.25% Euro Senior Notes due 2009............................................ 96,429 100,894
UPC 13.375% USD Senior Discount Notes due 2009................................... 263,939 255,786
UPC 13.375% Euro Senior Discount Notes due 2009.................................. 101,490 102,847
UPC 11.25% USD Senior Notes due 2010............................................. 595,115 -
UPC 11.25% Euro Senior Notes due 2010............................................ 190,897 -
UPC 11.5% USD Senior Notes due 2010.............................................. 283,427 -
UPC 13.75% Senior Discount Notes due 2010........................................ 525,754 -
@Entertainment Senior Discount Notes............................................. 270,932 286,089
United A/P Notes................................................................. 421,895 407,945
---------- ----------
5,955,447 4,385,004
Less current portion........................................................ - -
---------- ----------
Total senior discount notes and senior notes................................ $5,955,447 $4,385,004
========== ==========
</TABLE>
UPC 11.25% USD AND EURO SENIOR NOTES DUE 2010, UPC 11.5% USD SENIOR DISCOUNT
NOTES DUE 2010 AND UPC 13.75% USD SENIOR DISCOUNT NOTES DUE 2010 (COLLECTIVELY
THE "UPC JANUARY 2000 NOTES")
In January 2000, UPC completed a private placement bond offering consisting of
$600.0 million and euro200.0 million of ten-year 11.25% Senior Notes due 2010,
$300.0 million of ten-year 11.5% Senior Notes due 2010 and $1.0 billion
aggregate principal amount of ten-year 13.75% Senior Discount Notes due 2010.
The Senior Discount Notes were sold at 51.2% of the face amount yielding gross
proceeds of $512.2 million and will accrue but not pay interest until 2005. UPC
has entered into cross-currency swaps, swapping a total of $300.0 million of the
11.25% Senior Notes into fixed Euro notes with a notional amount of euro297.0
million.
16
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. OTHER LONG-TERM DEBT
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
2000 1999
-------------- ------------
(In thousands)
<S> <C> <C>
UPC Senior Credit Facility...................................................... $ 469,781 $ 359,720
UPC Nederland Facilities........................................................ 383,757 588,310
UPC France Facilities........................................................... 156,382 146,157
Other UPC....................................................................... 88,977 123,199
VTR Bank Facility............................................................... 176,000 176,000
New Austar Bank Facility........................................................ 201,530 202,703
Saturn Bank Facility............................................................ 56,943 57,685
Other Asia/Pacific.............................................................. 2,895 2,263
Other Latin America............................................................. 612 594
---------- ----------
1,536,877 1,656,631
Less current portion....................................................... (67,764) (52,180)
---------- ---------
Total other long-term debt................................................. $1,469,113 $1,604,451
========== ==========
</TABLE>
STAND-BY FACILITY
In March 2000, UPC closed a euro2.0 ($1.9) billion stand-by revolving bank
facility with one of its core banks. When drawn, the facility will bear interest
at EURIBOR + 5.0%. The commitment expires December 31, 2000. The drawn portion
can be renewed at that date with an increase in the borrowing rate to be repaid
after seven years from closing.
10. CONVERTIBLE PREFERRED STOCK
SERIES B
In connection with the Company's acquisition of certain assets in Australia in
July 1998, and the acquisition of an additional interest in XYZ Entertainment in
September 1998, the Company issued a total of 139,031 shares of par value $0.01
per share Series B Preferred Stock. The Series B Preferred Stock had an initial
liquidation value of $212.50 per share (approximately $29.5 million) and accrues
dividends at a rate of 6.5% per annum, compounded quarterly. Each share of
Series B Preferred Stock is convertible into the number of shares of the
Company's Class A Common Stock equal to the liquidation value at the time of
conversion divided by $10.63. The Company is required to redeem the Series B
Preferred Stock on June 30, 2008 at a redemption price equal to its then
liquidation value plus accrued dividends. Cumulative to date a total of 24,908
shares of Series B Preferred Stock have been converted into 533,177 shares of
Class A Common Stock. Assuming none of the remaining 114,123 shares of Series B
Preferred Stock is converted prior to redemption, the total cost to the Company
upon redemption would be approximately $45.7 million.
SERIES C
In July 1999, the Company issued 425,000 shares of par value $0.01 per share
Series C Preferred Stock, resulting in gross and net proceeds to the Company of
$425.0 million and $381.6 million, respectively. The purchasers of the Series C
Preferred Stock deposited $29.75 million into an account from which the holders
will be entitled to quarterly payments in an amount equal to $17.50 per
preferred share commencing on September 30, 1999 through June 30, 2000, in cash
or Class A Common Stock at United's option. On September 30, 1999, December 31,
1999 and March 31, 2000 the holders received their quarterly payment in cash.
The Series C Preferred Stock had an initial liquidation value of $1,000 per
share, and accrues dividends perpetually at a rate of 7.0% per annum, payable
quarterly on March 31, June 30, September 30 and December 31 of each year,
commencing on September 30, 2000, payable in cash or Class A Common Stock at the
Company's option. Each share of Series C Preferred Stock is convertible any time
at the option of the holder into the number of shares of the Company's Class A
Common Stock equal to the liquidation value at the time of conversion divided by
$42.15.
17
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SERIES D
In December 1999, the Company issued 287,500 shares of par value $0.01 per share
Series D Preferred Stock, resulting in gross and net proceeds to the Company of
$287.5 million and $259.9 million, respectively. The purchasers of the Series D
Preferred Stock deposited $20.1 million into an account from which the holders
will be entitled to payments in an amount equal to $17.50 per preferred share
per quarter commencing on December 31, 1999 through September 30, 2000 in cash
or Class A Common Stock at United's option. On December 31, 1999 and March 31,
2000 the holders received their payment in cash. The Series D Preferred Stock
had an initial liquidation value of $1,000 per share, and accrues dividends
perpetually at a rate of 7.0% per annum, payable quarterly on March 31, June 30,
September 30 and December 31 of each year, commencing on December 31, 2000,
payable in cash or Class A Common Stock at the Company's option. Each share of
Series D Preferred Stock is convertible any time at the option of the holder
into the number of shares of the Company's Class A Common Stock equal to the
liquidation value at the time of conversion divided by $63.79.
11. STOCKHOLDERS' EQUITY
COMMON STOCK
In April 1993, the Company adopted a Restated Certificate of Incorporation
pursuant to which the Company authorized the issuance of two classes of common
stock, Class A Common Stock and Class B Common Stock. Each share of Class A
Common Stock is entitled to one vote per share while each share of Class B
Common Stock is entitled to ten votes per share. Each share of Class B Common
Stock is convertible at any time at the option of the holder into one share of
Class A Common Stock. The two classes of common stock are identical in all other
respects.
COMMON STOCK SPLIT
On November 11, 1999, the Board of Directors authorized a two-for-one stock
split effected in the form of a stock dividend distributed on November 30, 1999
to shareholders of record on November 22, 1999. The effect of the stock split
has been recognized retroactively in all share and per share data in the
accompanying consolidated financial statements and notes.
UPC STOCK SPLIT
In March 2000, at an extraordinary general meeting of shareholders, shareholders
of UPC approved an amendment to UPC's Articles of Association to effect a
three-for-one stock split. All share and per share amounts in the accompanying
notes to the consolidated financial statements have been adjusted to reflect
this stock split.
EQUITY TRANSACTIONS OF SUBSIDIARIES
The issuance of warrants, the issuance of convertible debt with an equity
component, variable plan accounting for stock options and the recognition of
deferred compensation expense by the Company's subsidiaries affects the equity
accounts of the Company. The following represents the effect on additional
paid-in capital and deferred compensation as a result of these equity
transactions:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 2000
---------------------------------------------
Austar
UPC United Total
------------- ----------- ------------
(In thousands)
<S> <C> <C> <C>
Variable plan accounting for stock options......... $75,653 $ - $75,653
Deferred compensation expense...................... (75,653) - (75,653)
Amortization of deferred compensation.............. 12,785 1,853 14,638
Issuance of shares by subsidiary of UPC............ 27,513 - 27,513
------- ------ -------
Total......................................... $40,298 $1,853 $42,151
======= ====== =======
</TABLE>
18
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OTHER CUMULATIVE COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
2000 1999
------------- -------------
(In thousands)
<S> <C> <C>
Foreign currency translation adjustments......................... $(241,091) $(217,942)
Unrealized gain on available-for-sale securities................. 6,720 6,704
--------- ---------
Total ...................................................... $(234,371) $(211,238)
========= =========
</TABLE>
12. BASIC AND DILUTED NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Basic:
Net (loss) income.............................................. $(244,938) $688,351
Accretion of Series A Convertible Preferred Stock.............. - (161)
Accretion of Series B Convertible Preferred Stock.............. (438) (492)
Accretion of Series C Convertible Preferred Stock.............. (7,438) -
Accretion of Series D Convertible Preferred Stock.............. (5,031) -
--------- --------
Basic net (loss) income attributable to common
shareholders............................................ (257,845) 687,698
--------- --------
Diluted:
Accretion of Series A Convertible Preferred Stock.............. - (1) 161
Accretion of Series B Convertible Preferred Stock.............. - (1) 492
Accretion of Series C Convertible Preferred Stock.............. - (1) -
Accretion of Series D Convertible Preferred Stock.............. - (1) -
--------- --------
Diluted net (loss) income attributable to common
shareholders............................................ $(257,845) $688,351
========= ========
</TABLE>
(1) Excluded from the calculation of diluted net (loss) income
attributable to common shareholders because the effect is
anti-dilutive.
19
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SEGMENT INFORMATION
<TABLE>
<CAPTION>
As of
March 31,
For the Three Months Ended March 31, 2000 2000
---------------------------------------------------------------------------- -----------
Internet/ Total
Video Telephone Data Programming Other Total Assets
---------- ---------- ---------- ----------- ---------- --------- -----------
Revenue: (In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Europe:
The Netherlands......... $ 42,781 $ 16,004 $ 5,241 $ 505 $ - $ 64,531 $ 2,408,224
Austria................. 20,454 7,037 5,531 - - 33,022 388,815
Belgium................. 3,601 275 802 - - 4,678 47,428
Czech Republic.......... 6,204 255 - - 1,023 7,482 172,858
France.................. 13,914 1,853 404 - - 16,171 751,849
Hungary................. 11,628 5,237 57 - - 16,922 180,969
Norway.................. 12,119 450 399 - - 12,968 317,377
Poland.................. 17,055 - - 10,595 - 27,650 1,228,458
Sweden.................. 8,123 - 835 - - 8,958 463,306
Corporate and Other..... 3,891 1,391 - - 244 5,526 1,884,007
-------- -------- --------- -------- -------- -------- -----------
Total Europe.......... 139,770 32,502 13,269 11,100 1,267 197,908 7,843,291
-------- -------- --------- -------- -------- -------- -----------
Asia/Pacific:
Australia............... 40,849 - 8 - 599 41,456 570,843
New Zealand............. 844 3,166 878 - - 4,888 106,980
Corporate and Other..... - - - - - - 52,482
-------- -------- --------- -------- -------- -------- -----------
Total Asia/Pacific.... 41,693 3,166 886 - 599 46,344 730,305
-------- -------- --------- -------- -------- -------- -----------
Latin America:
Chile................... 28,952 6,565 107 - - 35,624 533,435
Brazil.................. 1,389 - - - - 1,389 18,249
Corporate and Other..... 560 - - - 4 564 60,305
-------- -------- --------- -------- -------- -------- -----------
Total Latin America... 30,901 6,565 107 - 4 37,577 611,989
-------- -------- --------- -------- -------- -------- -----------
Corporate & Other......... - - - - 27 27 1,275,771
------- -------- -------- -------- -------- -------- -----------
Total Company......... $212,364 $ 42,233 $ 14,262 $ 11,100 $ 1,897 $281,856 $10,461,356
======== ======== ======== ======== ======== ======== ===========
Adjusted EBITDA: (1)
Europe:
The Netherlands......... $ 21,219 $(11,838) $(32,047) $ (7,557) $ - $(30,223)
Austria................. 11,112 (1,551) 166 - - 9,727
Belgium................. 1,444 (139) (1,121) - - 184
Czech Republic.......... 917 23 - - 411 1,351
France.................. 1,499 (2,714) (974) - - (2,189)
Hungary................. 3,601 2,905 (1,056) - - 5,450
Norway.................. 4,847 (2,791) (839) - - 1,217
Poland.................. 1,059 - - (18,729) (320) (17,990)
Sweden.................. 3,692 (697) (2,061) - - 934
Corporate and Other..... 1,647 (1,369) (1,679) (63) (23,734) (25,198)
-------- -------- -------- -------- -------- --------
Total Europe.......... 51,037 (18,171) (39,611) (26,349) (23,643) (56,737)
-------- -------- -------- -------- -------- --------
Asia/Pacific:
Australia............... 1,192 (37) (1,721) - (1,777) (2,343)
New Zealand............. (253) (357) 248 - (1,344) (1,706)
Corporate and Other..... - - - - (371) (371)
-------- -------- -------- -------- -------- --------
Total Asia/Pacific.... 939 (394) (1,473) - (3,492) (4,420)
-------- -------- -------- -------- -------- --------
Latin America:
Chile................... 7,356 (2,100) (132) - - 5,124
Brazil.................. 46 - - - - 46
Corporate and Other..... (188) - - - 1,502 1,314
-------- -------- -------- -------- -------- --------
Total Latin America... 7,214 (2,100) (132) - 1,502 6,484
-------- -------- -------- -------- -------- --------
Corporate & Other......... - - - - (1,353) (1,353)
-------- -------- -------- -------- -------- --------
Total Company......... $ 59,190 $(20,665) $(41,216) $(26,349) $(26,986) $(56,026)
======== ======== ======== ======== ======== ========
</TABLE>
20
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
As of
December 31,
For the Three Months Ended March 31, 1999 1999
---------------------------------------------------------------------------- ------------
Internet/ Total
Video Telephone Data Programming Other Total Assets
---------- ---------- ---------- ----------- ---------- --------- ------------
Revenue: (In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Europe:
The Netherlands......... $16,690 $ 3,586 $ 338 $ - $ - $ 20,614 $3,157,285
Austria................. 22,242 125 2,369 - - 24,736 356,337
Belgium................. 4,025 - 457 - - 4,482 47,826
Czech Republic.......... 1,142 - - - - 1,142 159,806
France.................. 1,594 9 9 - - 1,612 498,776
Hungary................. 8,854 - 32 - - 8,886 215,448
Norway.................. 12,277 3 95 - - 12,375 244,975
Poland.................. - - - - - - 1,218,956
Sweden.................. - - - - - - 474,899
Corporate and Other..... 941 - - 199 887 2,027 77,219
------- ------- ------- ------- ------- -------- ----------
Total Europe.......... 67,765 3,723 3,300 199 887 75,874 6,451,527
------- ------- ------- ------- ------- -------- ----------
Asia/Pacific:
Australia............... 30,432 - - - - 30,432 563,627
New Zealand............. - - - - - - 76,139
Corporate and Other..... - - - - - - 52,441
------- ------- ------- ------- ------- -------- ----------
Total Asia/Pacific.... 30,432 - - - - 30,432 692,207
------- ------- ------- ------- ------- -------- ----------
Latin America:
Chile...................... - - - - - - 489,638
Brazil.................. 984 - - - - 984 17,172
Corporate and Other..... 628 - - - - 628 71,379
------- ------- ------- ------- ------- -------- ----------
Total Latin America... 1,612 - - - - 1,612 578,189
------- ------- ------- ------- ------- -------- ----------
Corporate & Other......... - - - - - - 1,280,930
------- ------- ------- ------- ------- -------- ----------
Total Company......... $99,809 $ 3,723 $ 3,300 $ 199 $ 887 $107,918 $9,002,853
======= ======= ======= ======= ======= ======== ==========
Adjusted EBITDA: (1)
Europe:
The Netherlands......... $ 8,628 $ (1,202) $(6,439) $ (605) $ - $ 382
Austria................. 12,662 (2,269) (178) - - 10,215
Belgium................. 1,109 - (691) - - 418
Czech Republic.......... (245) - - - - (245)
France.................. (6) (1,078) (513) - - (1,597)
Hungary................. 3,030 - (3) - - 3,027
Norway.................. 5,163 (1,628) (1,252) - - 2,283
Corporate and Other..... 212 - - (2,088) (5,479) (7,355)
------- ------- ------- ------- ------- --------
Total Europe.......... 30,553 (6,177) (9,076) (2,693) (5,479) 7,128
------- ------- ------- ------- ------- --------
Asia/Pacific:
Australia............... (3,454) - - - (1,029) (4,483)
New Zealand............. - - - - - -
Corporate and Other..... - - - - 3,163 3,163
------- ------- ------- ------- ------- --------
Total Asia/Pacific.... (3,454) - - - 2,134 (1,320)
------- ------- ------- ------- ------- --------
Latin America:
Chile................... - - - - - -
Brazil.................. (466) - - - - (466)
Corporate and Other..... - - - - (1,370) (1,370)
------- ------- ------- ------- ------- --------
Total Latin America... (466) - - - (1,370) (1,836)
------- ------- ------- ------- ------- --------
Corporate & Other......... - - - - (251) (251)
------- ------- ------- ------- ------- --------
Total Company......... $26,633 $(6,177) $(9,076) $(2,693) $(4,966) $ 3,721
======= ======= ======= ======= ======= ========
</TABLE>
21
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) Adjusted EBITDA represents net operating earnings before depreciation,
amortization and stock-based compensation charges. Industry analysts
generally consider Adjusted EBITDA to be a helpful way to measure the
performance of cable television operations and communications companies.
Management believes Adjusted EBITDA helps investors to assess the cash flow
from operations from period to period and thus to value the Company's
business. Adjusted EBITDA should not, however, be considered a replacement
for net income, cash flows or for any other measure of performance or
liquidity under generally accepted accounting principles, or as an
indicator of a company's operating performance. The presentation of
Adjusted EBITDA may not be comparable to statistics with a similar name
reported by other companies. Not all companies and analysts calculate
Adjusted EBITDA in the same manner.
Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net operating loss............................................... $(296,584) $(72,317)
Depreciation and amortization.................................... 172,098 57,398
Non-cash stock-based compensation expense........................ 68,460 18,640
--------- --------
Consolidated Adjusted EBITDA.................................. $ (56,026) $ 3,721
========= ========
</TABLE>
14. SUBSEQUENT EVENTS
AFFIRMATIVE JUDGMENT AGAINST WHARF (HOLDINGS) LIMITED ("WHARF HOLDINGS")
The 1997 jury verdicts in favor of United in its lawsuit against Wharf Holdings
were affirmed April 28, 2000 by the 10th Circuit U.S. Court of Appeals. The
Court also affirmed the separate judgement in the Company's favor for contempt
sanctions. The judgments, with accrued interest, total over $186.0 million.
22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. These
forward-looking statements may include, among other things, statements
concerning our plans, objectives and future economic prospects, expectations,
beliefs, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements,
or industry results, to be materially different from what we say or imply with
such forward-looking statements. These factors include, among other things,
changes in television viewing preferences and habits by our subscribers and
potential subscribers, their acceptance of new technology, programming
alternatives and new video services we may offer. They also include subscribers'
acceptance of our newer telephone and Internet/data services, our ability to
manage and grow our newer telephone and Internet/data services, our ability to
secure adequate capital to fund other system growth and development and our
planned acquisitions, risks inherent in investment and operations in foreign
countries, changes in government regulation, and changes in the nature of key
strategic relationships with joint ventures. We and our subsidiaries have
announced many potential acquisitions, many of which are subject to various
conditions, some of which may not occur. These forward-looking statements apply
only as of the time of this report, and we have no obligation or plans to
provide updates or revisions to these forward-looking statements or any other
changes in events, conditions or circumstances on which these statements are
based. The following discussion and analysis of financial condition and results
of operations cover the three months ended March 31, 2000 and 1999, and should
be read together with our consolidated financial statements and related notes
included elsewhere herein. These consolidated financial statements provide
additional information regarding our financial activities and condition.
INTRODUCTION
United was formed in 1989 for the purpose of developing, acquiring and managing
foreign video, programming and telephone operations outside the United States.
Today, we are a leading broadband communications provider outside the United
States. We provide video services in 23 countries worldwide and telephone and
Internet/data services in a growing number of our international markets. Our
operations are grouped into three major geographic regions: Europe, Asia/Pacific
and Latin America. Our European operations are held through our 53.0% owned,
publicly traded subsidiary, UPC, which is the largest Pan-European broadband
communications (video, telephone and Internet/data) provider in terms of the
number of subscribers. Our Asia/Pacific operations are primarily held through
our 72.3% owned, publicly traded subsidiary, Austar United, which owns the
largest provider of video services in regional Australia, various Australian
programming interests and the only full service provider of broadband
communications in New Zealand. Our primary Latin American operation is VTR,
Chile's largest video service provider and a growing provider of telephone
services.
SUMMARY OPERATING DATA
The following comparative operating data reflects video subscribers, telephone
lines, programming and data subscribers, as well as selected financial
statistics of the operating systems in which we had an ownership interest as of
March 31, 2000. In addition, the following proportionate data represents certain
operating and financial results for us, multiplied by our applicable ownership
percentage.
23
<PAGE>
<TABLE>
<CAPTION>
GROSS OPERATING SYSTEM DATA
As of and for the Three Months Ended March 31, 2000
-------------------------------------------------------------------------------------------------------
Homes in Two-way Basic Long-
United Service Homes Homes Subscribers/ Basic Adjusted Term
Ownership Area Passed Passed Lines Penetration Revenue EBITDA(1) Debt (2)
--------- --------- ---------- ---------- ------------ ----------- |--------- ---------- -----------
| (In thousands) (3)
<S> <C> <C> <C> <C> <C> <C> | <C> <C> <C>
UPC (EUROPE) |
- ------------ |
Video Subscribers: |
The Netherlands......... 53.0% 2,513,715 2,421,167 1,945,152 2,255,031 93.1% | $ 41,625 $ 20,404 $ -
Poland.................. 53.0% 1,950,000 1,769,569 - 1,327,176 75.0% | $ 26,903 $(17,504) $ -
Germany................. 13.3% 1,422,826 1,422,826 30,456 919,641 64.6% | $ 27,018 $ 8,967 $199,849
Hungary (UPC |
Magyarorszag).......... 53.0% 915,500 680,197 100,307 518,185 76.2% | $ 10,494 $ 3,086 $ -
Austria................. 50.4% 1,080,640 907,870 824,290 476,037 52.4% | $ 19,901 $ 10,812 $ -
Israel.................. 24.7% 660,000 616,975 385,447 431,334 69.9% | $ 41,492 $ 11,269 $232,488
France.................. 48.8% 2,105,542 1,080,960 120,555 375,288 34.7% | $ 13,538 $ 1,444 $ -
Czech Republic.......... 52.9% 868,250 776,881 17,740 364,275 46.9% | $ 6,037 $ 892 $ -
Norway.................. 53.0% 529,000 468,335 63,827 330,012 70.5% | $ 11,791 $ 4,716 $ -
Slovak Republic......... 50.3-53.0% 417,813 309,198 - 247,455 80.0% | $ 2,907 $ 978 $ -
Sweden.................. 53.0% 770,000 421,624 227,000 246,087 58.4% | $ 7,904 $ 3,012 $ -
Belgium................. 53.0% 530,000 150,426 147,903 125,642 83.5% | $ 3,504 $ 1,405 $ -
Romania................. 27.0-37.1% 509,320 391,690 - 261,594 66.8% | $ 1,103 $ 411 $ -
Malta................... 26.5% 177,000 175,174 - 77,296 44.1% | $ 3,882 $ 1,098 $ 27,655
Hungary (Monor)......... 51.5% 85,561 70,061 84,916 32,574 46.5% | $ 370 $ 187 $ -
---------- ---------- --------- --------- | -------- -------- --------
Total............... 14,535,167 11,662,953 3,947,593 7,987,627 | $218,469 $ 51,177 $459,992
---------- ---------- --------- --------- | -------- -------- --------
Telephone Lines: |
The Netherlands......... 53.0% 2,513,715 N/A N/A 129,568 N/A | $ 15,571 $(11,480) $ -
Hungary (Monor)......... 51.5% 85,561 N/A N/A 73,328 N/A | $ 2,299 $ 943 $ -
Austria................. 50.4% 1,080,640 N/A N/A 56,399 N/A | $ 6,847 $ (1,083) $ -
France.................. 48.8% 2,105,542 N/A N/A 19,313 N/A | $ 1,803 $ (2,589) $ -
Norway.................. 53.0% 529,000 N/A N/A 6,114 N/A | $ 438 $ (1,791) $ -
Czech Republic.......... 52.9% 868,250 N/A N/A 3,648 N/A | $ 248 $ 22 $ -
---------- ---------- --------- --------- | -------- -------- --------
Total............... 7,182,708 N/A N/A 288,370 | $ 27,206 $(15,978) $ -
---------- ---------- --------- --------- | -------- -------- --------
Data Subscribers: |
Internet................ 13.3-53.0% 9,867,223 N/A N/A 169,714 N/A | $ 15,221 $(36,908) $ -
---------- ---------- --------- --------- | -------- -------- --------
Programming Subscribers: |
Ireland................. 42.4% N/A N/A N/A 1,760,000 N/A | N/A N/A $ -
Spain/Portugal.......... 26.5% N/A N/A N/A 1,137,000 N/A | N/A N/A $ -
---------- ---------- --------- --------- | -------- -------- --------
Total............... N/A N/A N/A 2,897,000 | N/A N/A $ -
---------- ---------- --------- --------- | -------- -------- --------
AUSTAR UNITED (AUSTRALIA/NEW ZEALAND) |
- ------------------------------------- |
Video Subscribers: |
Australia............... 72.3% 2,085,000 2,083,108 - 389,816 18.7% | $ 39,220 $ 1,117 $ -
New Zealand............. 72.3% 141,000 87,319 87,319 17,811 20.4% | $ 562 $ (302) $ -
---------- ---------- --------- --------- | -------- -------- --------
Total............... 2,226,000 2,170,427 87,319 407,627 | $ 39,782 $ 815 $ -
---------- ---------- --------- --------- | -------- -------- --------
Telephone Lines: |
New Zealand............. 72.3% 141,000 95,397 N/A 28,095 29.5% | $ 2,480 $ (295) $ -
---------- ---------- --------- --------- | -------- -------- --------
Data Subscribers: |
New Zealand............. 72.3% 141,000 95,397 N/A 8,485 8.9% | $ 687 $ 191 $ -
---------- ---------- --------- --------- | -------- -------- --------
Programming Subscribers: |
Australia............... 36.2% N/A N/A N/A 963,000 N/A | $ 10,995 $ 4,084 $ -
---------- ---------- --------- --------- | -------- -------- --------
OTHER ASIA/PACIFIC |
- ------------------ |
Video Subscribers: |
Philippines............. 19.6% 600,000 455,000 - 193,338 42.5% | $ 5,859 $ 2,239 $ 21,727
---------- ---------- --------- --------- | -------- -------- --------
24
<PAGE>
GROSS OPERATING SYSTEM DATA (Continued)
As of and for the Three Months Ended March 31, 2000
-------------------------------------------------------------------------------------------------------
Homes in Two-way Basic Long-
United Service Homes Homes Subscribers/ Basic Adjusted Term
Ownership Area Passed Passed Lines Penetration Revenue EBITDA(1) Debt (2)
--------- --------- ---------- ---------- ------------ ----------- |--------- ---------- -----------
| (In thousands) (3)
LATIN AMERICA |
- ------------- |
Video Subscribers: |
Chile................... 100.0% 2,350,000 1,620,586 420,664 389,467 24.0% | $ 28,952 $ 7,356 $ -
Mexico.................. 90.3% 341,600 231,969 - 60,557 26.1% | $ 3,550 $ 873 $ -
Brazil (Jundiai)........ 46.3% 70,200 67,154 - 17,649 26.3% | $ 1,581 $ (288) $ -
Brazil (TV Show |
Brasil)................ 100.0% 437,000 306,000 - 17,928 5.9% | $ 1,421 $ 50 $ -
Peru.................... 62.2% 140,000 63,932 - 8,548 13.4% | $ 559 $ (187) $ -
---------- ---------- --------- --------- | -------- -------- --------
Total............... 3,338,800 2,289,641 420,664 494,149 | $ 36,063 $ 7,804 $ -
---------- ---------- --------- --------- | -------- -------- --------
Telephone Lines: |
Chile................... 100.0% 2,350,000 420,664 N/A 79,138 18.8% | $ 6,565 $ (2,100) $ -
---------- ---------- --------- --------- | -------- -------- --------
Data Subscribers: |
Chile................... 100.0% 2,350,000 420,664 N/A 1,431 0.3% | $ 107 $ (132) $ -
---------- ---------- --------- --------- | -------- -------- --------
Programming Subscribers: |
Latin America........... 50.0% N/A N/A N/A 5,436,101 N/A | $ 2,780 $ (1,631) $ -
---------- ---------- --------- --------- | -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
As of and for the Three Months Ended March 31, 2000
-------------------------------------------------------------------------------------------
Homes in Two-way Basic Long-
Service Homes Homes Subscribers/ Adjusted Term
Area Passed Passed Lines Revenue EBITDA(1) Debt (2)
--------- ---------- ----------- ------------ |----------- ---------- ------------
| (In thousands) (3)
<S> <C> <C> <C> <C> | <C> <C> <C>
TOTAL COMPANY BASED ON GROSS DATA (4): |
- -------------------------------------- |
Video Subscribers.................. 20,699,967 16,578,021 4,455,576 9,082,741 | $300,173 $62,035 $ 481,719
Telephone Lines.................... 9,673,708 N/A N/A 395,603 | $ 36,251 $(18,373) $ -
Data Subscribers................... 12,358,223 N/A N/A 179,630 | $ 16,015 $(36,849) $ -
Programming Subscribers............ N/A N/A N/A 9,296,101 | $ 13,775 $ 2,453 $ -
|
TOTAL COMPANY BASED ON CONSOLIDATED SYSTEMS (5): |
- ------------------------------------------------ |
Video Subscribers.................. 17,428,341 13,608,923 4,039,673 7,382,926 | $212,364 $ 59,190 $1,695,302
Telephone Lines.................... 9,673,708 N/A N/A 395,603 | $ 42,233 $(20,665) $ -
Data Subscribers................... 10,935,397 N/A N/A 179,480 | $ 14,262 $(41,216) $ -
Programming Subscribers............ N/A N/A N/A 1,760,000 | $ 11,100(7) $(26,349)(7) $ -
|
TOTAL COMPANY BASED ON PROPORTIONATE DATA (6): |
- ---------------------------------------------- |
Video Subscribers.................. 11,639,552 9,124,111 2,426,582 4,460,646 | $159,956 $ 29,584 $ 95,593
Telephone Lines.................... 6,139,090 N/A N/A 245,500 | $ 22,483 $ (10,658) $ -
Data Subscribers................... 6,998,840 N/A N/A 95,761 | $ 8,511 $ (19,520) $ -
Programming Subscribers............ N/A N/A N/A 4,113,721 | $ 5,365 $ 661 $ -
</TABLE>
25
<PAGE>
<TABLE><CAPTION>
GROSS OPERATING SYSTEM DATA
As of and for the Three Months Ended March 31, 1999
-------------------------------------------------------------------------------------------------------
Homes in Two-way Basic Long-
United Service Homes Homes Subscribers/ Basic Adjusted Term
Ownership Area Passed Passed Lines Penetration Revenue EBITDA(1) Debt (2)
--------- --------- ---------- ---------- ------------ ----------- |--------- ---------- -----------
| (In thousands) (3)
<S> <C> <C> <C> <C> <C> <C> | <C> <C> <C>
UPC (EUROPE) |
- ------------ |
Video Subscribers: |
The Netherlands........ 31.2-62.4% 1,529,214 1,491,220 986,109 1,404,131 94.2% | $ 41,760 $ 14,489 $216,527
Hungary (UPC |
Magyarorszag)......... 49.5% 901,500 528,719 - 442,390 83.7% | $ 7,561 $ 2,576 $ -
Austria................ 59.3% 1,076,190 903,200 623,490 457,165 50.6% | $ 21,049 $ 8,692 $ -
Israel................. 29.1% 595,000 583,408 364,000 406,970 69.8% | $ 31,340 $ 12,393 $218,036
Czech Republic......... 62.4% 229,531 153,949 - 54,691 35.5% | $ 972 $ (209) $ -
France................. 62.2% 190,000 82,320 82,320 32,662 39.7% | $ 1,372 $ (1,359) $ -
Norway................. 62.4% 529,900 464,941 18,685 322,735 69.4% | $ 10,531 $ 1,942 $ -
Slovak Republic........ 46.8-62.4% 64,493 40,494 - 25,697 63.5% | $ 262 $ (49) $ -
Belgium................ 62.4% 133,030 133,030 104,039 126,818 95.3% | $ 3,814 $ 356 $ -
Romania................ 31.8-62.4% 180,000 98,174 - 62,524 63.7% | $ 538 $ 220 $ -
Malta.................. 31.2% 179,000 164,553 - 71,040 43.2% | $ 3,464 $ 1,546 $ 20,285
Hungary (Monor)........ 27.9% 85,000 68,339 - 31,108 45.5% | $ 4,343 $ 837 $ 36,564
--------- --------- --------- --------- | -------- -------- --------
Total.............. 5,692,858 4,712,347 2,178,643 3,437,931 | $127,006 $ 41,434 $491,412
--------- --------- --------- --------- | -------- -------- --------
Telephone Lines: |
The Netherlands........ 31.2-62.4% 1,529,214 N/A N/A 46,102 N/A | [Financial information is
Hungary (Monor)........ 27.9% 85,000 N/A N/A 70,210 N/A | included in multi-channel
--------- --------- --------- --------- | TV information above.]
Total 1,614,214 N/A N/A 116,312 |
--------- --------- --------- --------- |
Data Subscribers: | [Financial information is
Internet............... 31.2-62.4% N/A N/A N/A 35,449 N/A | included in multi-channel
--------- --------- --------- ---------- | TV information above.]
Programming Subscribers: |
Ireland................ 49.9% N/A N/A N/A 801,245 N/A | $ 170 $ (1,776) $ -
Spain/Portugal......... 20.9% N/A N/A N/A 990,000 N/A | $ 3,707 $ 746 $ 3,500
--------- --------- --------- --------- | -------- -------- --------
Total.............. N/A N/A N/A 1,791,245 | $ 3,877 $ (1,030) $ 3,500
--------- --------- --------- --------- | -------- -------- --------
AUSTAR UNITED (AUSTRALIA/NEW ZEALAND) |
- ------------------------------------- |
Video Subscribers: |
Australia.............. 98.0% 2,085,000 2,083,108 - 311,119 14.9% | $ 28,153 $ (5,689) $ -
New Zealand............ 63.7% 141,000 56,249 56,249 7,570 13.5% | $ 1,294 $ (2,096) $ 24,903
---------- --------- --------- --------- | -------- -------- --------
Total.............. 2,226,000 2,139,357 56,249 318,689 | $ 29,447 $ (7,785) $ 24,903
--------- --------- --------- --------- | -------- -------- --------
Telephone Lines: |
New Zealand............ 63.7% 141,000 53,257 N/A 14,902 28.0% |
--------- --------- --------- --------- |
Data Subscribers: | [Financial information is
New Zealand............ 63.7% N/A N/A N/A 900 N/A | included in multi-channel
--------- --------- --------- --------- | TV information above.]
Programming Subscribers: |
Australia.............. 49.0% N/A N/A N/A 750,400 N/A | $ 6,304 $ 2,396 $ -
--------- --------- --------- --------- | -------- -------- --------
OTHER ASIA/PACIFIC |
- ------------------ |
Video Subscribers: |
Philippines............ 19.2% 600,000 419,037 - 164,257 39.2% | $ 4,133 $ 960 $ 30
--------- --------- --------- --------- | -------- -------- --------
LATIN AMERICA |
- ------------- |
Video Subscribers: |
Chile.................. 34.0% 2,321,000 1,594,582 244,965 390,864 24.5% | $ 26,871 $ 6,746 $122,392
Mexico................. 49.0% 341,600 224,760 - 55,880 24.9% | $ 3,164 $ 1,217 $ -
Brazil (Jundiai)....... 46.3% 70,200 66,255 - 19,166 28.9% | $ 1,549 $ 563 $ 81
Brazil (TV Show |
Brasil)............... 100.0% 437,000 306,000 - 12,605 4.1% | $ 1,000 $ (205) $ -
Peru................... 60.0% 140,000 58,193 - 9,388 16.1% | $ 177 $ (27) $ -
--------- --------- --------- --------- | -------- -------- --------
Total.............. 3,309,800 2,249,790 244,965 487,903 | $ 32,761 $ 8,294 $122,473
--------- --------- --------- --------- | -------- -------- --------
Telephone Lines: |
Chile.................. 34.0% 2,321,000 244,965 N/A 32,884 13.4% | [Financial information is
--------- --------- --------- --------- | included in multi-channel
Programming Subscribers: | TV information above.]
Latin America.......... 50.0% N/A N/A N/A 3,889,363 N/A | $ 1,425 $ (4,004) $ -
--------- --------- --------- --------- | -------- -------- --------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
As of and for the Three Months Ended March 31, 1999
-------------------------------------------------------------------------------------------
Homes in Two-way Basic Long-
Service Homes Homes Subscribers/ Adjusted Term
Area Passed Passed Lines Revenue EBITDA(1) Debt (2)
--------- ---------- ----------- ------------ |----------- ---------- ------------
| (In thousands) (3)
<S> <C> <C> <C> <C> | <C> <C> <C>
TOTAL COMPANY BASED ON GROSS DATA (4): |
- -------------------------------------- |
Video Subscribers.................. 11,828,658 9,520,531 2,479,857 4,408,780 | $193,347 $42,903 $638,818
Telephone Lines.................... 4,076,214 N/A N/A 164,098 | $ - $ - $ -
Data Subscribers................... N/A N/A N/A 36,349 | $ - $ - $ -
Programming Subscribers............ N/A N/A N/A 6,431,008 | $ 11,606 $(2,638) $ 3,500
|
TOTAL COMPANY BASED ON CONSOLIDATED SYSTEMS (5): |
- ------------------------------------------------ |
Video Subscribers.................. 6,917,358 5,768,348 1,428,534 2,728,203 | $100,704 $21,232 $792,991
Telephone Lines.................... 950,714 N/A N/A 20,760 | $ 3,723 $(6,178) $ -
Data Subscribers................... N/A N/A N/A 35,449 | $ 3,300 $(9,332) $ -
Programming Subscribers............ N/A N/A N/A 801,245 | $ 191 $(2,001) $ -
|
TOTAL COMPANY BASED ON PROPORTIONATE DATA (6): |
- ---------------------------------------------- |
Video Subscribers.................. 6,684,340 5,565,766 1,075,860 2,259,048 | $101,422 $15,074 $205,055
Telephone Lines.................... 1,676,410 N/A N/A 61,123 | $ - $ - $ -
Data Subscribers................... N/A N/A N/A 19,160 | $ - $ - $ -
Programming Subscribers............ N/A N/A N/A 2,919,109 | $ 4,660 $(1,558) $ 732
</TABLE>
(1) Adjusted EBITDA represents net operating earnings before depreciation,
amortization and stock-based compensation charges. Industry analysts
generally consider Adjusted EBITDA to be a helpful way to measure the
performance of cable television operations and communications companies. We
believe Adjusted EBITDA helps investors to assess the cash flow from our
operations from period to period and thus to value our business. Adjusted
EBITDA should not, however, be considered a replacement for net income,
cash flows or for any other measure of performance or liquidity under
generally accepted accounting principles, or as an indicator of a company's
operating performance. Our presentation of Adjusted EBITDA may not be
comparable to statistics with a similar name reported by other companies.
Not all companies and analysts calculate Adjusted EBITDA in the same
manner.
(2) The amounts disclosed herein represent unconsolidated debt. Debt for
consolidated operating systems is included in the footnotes to the
consolidated financial statements.
(3) The financial information presented herein has been taken from unaudited
financial information of the respective operating companies that were
providing service as of March 31, 2000. Certain information presented
herein has been derived from financial statements prepared in accordance
with foreign generally accepted accounting principles which differ from
U.S. generally accepted accounting principles. In addition, certain amounts
have been converted to U.S. dollars using the March 31, 2000 exchange rates
for the convenience translation.
(4) Summation of the gross operating system data on the previous page.
(5) Summation of the gross operating system data on the previous page, for
those systems that we consolidate in our financial statements due to
majority ownership and control.
(6) Summation of the gross operating system data on the previous page,
multiplied by our ownership percentage for each respective system.
(7) The consolidated financial information for @Entertainment (Poland) is
included in Programming. The financial information for @Entertainment
(Poland) within Gross Data is included in Multi-channel TV.
27
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth information from our major consolidated operating
systems:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------
2000 1999
----------- -----------
(In thousands)
<S> <C> <C>
UPC Revenue (USD):
Video............................................................ $139,770 $ 67,765
Telephone........................................................ 32,502 3,723
Internet/data.................................................... 13,269 3,300
Programming and DTH.............................................. 11,100 199
Other............................................................ 1,267 887
-------- --------
Total UPC Revenue............................................. $197,908 $ 75,874
======== ========
UPC Adjusted EBITDA (USD):
Video............................................................ $ 51,037 $ 30,553
Telephone........................................................ (18,171) (6,177)
Internet/data.................................................... (39,611) (9,076)
Programming and DTH.............................................. (26,349) (2,693)
Other............................................................ (23,643) (5,479)
-------- --------
Total UPC Adjusted EBITDA (1)................................. $(56,737) $ 7,128
======== ========
Austar United Revenue (USD):
Video............................................................ $ 41,693 $ 30,432
Telephone........................................................ 3,166 -
Internet/data and other.......................................... 1,485 -
-------- --------
Total Austar United Revenue................................... $ 46,344 $ 30,432
======== ========
Austar United Adjusted EBITDA (USD):
Video............................................................ $ 939 $ (3,454)
Telephone........................................................ (394) -
Internet/data and other.......................................... (4,594) (1,029)
-------- --------
Total Austar United Adjusted EBITDA (1)....................... $ (4,049) $ (4,483)
======== ========
VTR Revenue (USD)
Video............................................................ $ 28,952 $ 27,783
Telephone........................................................ 6,565 1,636
Internet/data.................................................... 107 -
-------- --------
Total VTR Revenue............................................. $ 35,624 $ 29,419
======== ========
VTR Adjusted EBITDA (USD)
Video............................................................ $ 7,356 $ 7,245
Telephone........................................................ (2,100) (1,415)
Internet/data.................................................... (132) -
-------- --------
Total VTR Adjusted EBITDA (1)................................. $ 5,124 $ 5,830
======== ========
</TABLE>
(1) "Adjusted EBITDA" represents net operating earnings before depreciation,
amortization and stock-based compensation charges. Stock-based compensation
charges result from variable plan accounting for our subsidiaries' phantom
stock option plans and are generally non-cash charges. Industry analysts
generally consider Adjusted EBITDA to be a helpful way to measure the
performance of cable television operations and communications companies. We
believe Adjusted EBITDA helps investors to assess the cash flow from our
operations from period to period and thus to value our business. Adjusted
EBITDA should not, however, be considered a replacement for net income,
cash flows or for any other measure of performance or liquidity under
generally accepted accounting principles, or as an indicator of a company's
operating performance. Our presentation of Adjusted EBITDA may not be
comparable to statistics with a similar name reported by other companies.
Not all companies and analysts calculate Adjusted EBITDA in the same
manner.
28
<PAGE>
The following rates for the primary currencies that impact our financial
statements are shown below per one U.S. dollar:
<TABLE>
<CAPTION>
Australian Chilean
Euro Dollar Peso
------------- ------------- -------------
<S> <C> <C> <C>
Average rate three months ended March 31, 2000.......... 1.0119 1.5898 512.5250
Average rate three months ended March 31, 1999.......... 0.8900 1.5729 485.4042
</TABLE>
REVENUE. Revenue increased $174.0 million, or 161.3%, from $107.9 million for
the three months ended March 31, 1999 to $281.9 million for the three months
ended March 31, 2000.
EUROPE. Revenue for UPC in U.S. dollar terms increased $122.0 million, or 160.7%
from $75.9 million for the three months ended March 31, 1999 to $197.9 million
for the three months ended March 31, 2000, despite a 13.7% devaluation of the
Euro to the U.S. dollar from period to period. On a functional currency basis,
UPC's revenue increased euro132.8 million or 196.7% from euro67.5 million for
the three months ended March 31, 1999 to euro200.3 million for the three months
ended March 31, 2000. Of this increase, approximately euro81.1 million resulted
from increased video revenue, euro29.6 million resulted from increased telephone
revenue, euro10.5 million resulted from increased Internet/data revenue and
euro11.6 million from increases in other revenue. The increase in video revenue
attributable to acquisitions totaled euro72.0 million, or 88.8% of the total
increase. Of this increase, acquisitions in The Netherlands represent 38.9%,
acquisitions in France represent 15.3%, the acquisition in Poland represents
24.0% and the acquisition in Sweden represents 10.0%. The remaining increase in
video revenue of approximately 11.8% came from subscriber growth, increased
revenue per subscriber in Austria, Norway, UPC's existing system in France, and
UPC's systems in Eastern Europe. The increase in UPC's telephone revenue is
primarily due to the launch of local telephone services, under the brand name
Priority Telecom, in UPC's Austrian, Dutch, French and Norwegian systems. In
addition, UPC began consolidating telephone revenue from its acquisitions of
A2000 (September 1999) and Monor (December 1999). The increase in UPC's
Internet/data revenue is primarily due to the launch of residential and business
cable-modem high-speed Internet access services, branded chello broadband in
April 1999. During the second quarter of 1999, UPC launched chello broadband on
the upgraded portion of its networks in Austria, Belgium, France, the
Netherlands (with the exception of A2000) and Norway. UPC launched chello
broadband in A2000 and Sweden in the fourth quarter of 1999.
ASIA/PACIFIC. Revenue for Austar United increased $15.9 million, or 52.3%, from
$30.4 million for the three months ended March 31, 1999 to $46.3 million for the
three months ended March 31, 2000. The increase in video revenue of
approximately $11.3 million was primarily due to Austar's subscriber growth
(389,816 at March 31, 2000 compared to 311,119 at March 31, 1999) as well as
growth in premium tiers, resulting in an average revenue per subscriber of
A$53.42 ($33.60) per month for the three months ended March 31, 2000 compared to
A$50.46 ($31.74) for the same period in the prior year. The remaining increase
of approximately $4.6 million in telephone and other revenue was due to the
consolidation of Saturn beginning August 1, 1999.
LATIN AMERICA. We began consolidating the results of operations of VTR effective
May 1, 1999. Revenue for VTR in U.S. dollar terms increased $6.2 million, or
21.1%, from $29.4 million for the three months ended March 31, 1999 to $35.6
million for the three months ended March 31, 2000, despite a 5.6% devaluation in
the Chilean peso to the U.S. dollar from period to period. The increase in
telephone revenue of $4.9 million resulted from telephone subscriber growth
(79,138 at March 31, 2000 compared to 32,884 at March 31, 1999) as well as an
increase in average monthly revenue per subscriber for telephone service from
$16.60 for the three months ended March 31, 1999 to $27.70 for the three months
ended March 31, 2000. Video revenue increased a modest $1.2 million because of
increased churn and lower sales volume than expected for its video service due
to an economic recession in Chile and increased competition. The number of
subscribers decreased from 390,864 as of March 31, 1999 to 389,467 as of March
31, 2000. The average monthly revenue per subscriber for video was $24.10 for
the three months ended March 31, 2000, compared to $23.60 for the three months
ended March 31, 1999.
ADJUSTED EBITDA. Adjusted EBITDA decreased $59.7 million during the three months
ended March 31, 2000 compared to the three months ended March 31, 1999.
EUROPE. Adjusted EBITDA for UPC in U.S. dollar terms decreased $63.8 million
from $7.1 million for the three months ended March 31, 1999 to negative $56.7
million for the three months ended March 31, 2000, including the benefit of a
13.7% devaluation of the Euro to the U.S. dollar from period to period. On a
functional currency basis, UPC's Adjusted EBITDA decreased euro63.7 million from
euro6.3 million for the three months ended March 31, 1999 to negative euro57.4
million for the three months ended March 31, 2000, primarily due to the
continued introduction of its telephone and Internet/data businesses. In
addition, as a percentage of revenue, operating expense for video increased 7.4%
from 33.1% for the three months ended March 31, 1999 to 40.5% for the three
29
<PAGE>
months ended March 31, 2000. This increase is primarily due to higher operating
costs as a percentage of revenue for systems UPC acquired during 1999. UPC
expects to reduce this percentage in future years through revenue growth and
operating efficiencies. UPC's negative Adjusted EBITDA from its local telephone
services was due to the recent launch of Priority Telecom in its Austrian,
Dutch, French and Norwegian systems. During the three months ended March 31,
2000, UPC's significant negative Adjusted EBITDA from its Internet/data service
was due to the launch of chello broadband on the upgraded portion of its
networks in Austria, Belgium, France, The Netherlands (with the exception of
A2000) and Norway in the second quarter. UPC launched chello broadband in A2000
and Sweden in the fourth quarter of 1999. UPC expects to incur substantial
operating losses related to its programming and DTH businesses for the next two
years, while UPC develops and expands its subscriber base.
ASIA/PACIFIC. Austar United's Adjusted EBITDA loss decreased by $0.5 million
from negative $4.5 million for the three months ended March 31, 1999 to negative
$4.0 million for the three months ended March 31, 2000. Austar United's Adjusted
EBITDA from its video business increased $4.4 million due to Austar achieving
incremental sales growth while keeping certain costs fixed, such as the national
customer operations center, corporate management staff and media-related
marketing costs. This improvement was offset by increased development expenses
of Austar United's new Internet/data business "Austar United Broadband" and
negative Adjusted EBITDA from the consolidation of Saturn beginning August 1,
1999.
LATIN AMERICA. We began consolidating the results of operations of VTR effective
May 1, 1999. VTR's Adjusted EBITDA in U.S. dollar terms decreased $0.7 million,
or 12.1%, from $5.8 million for the three months ended March 31, 1999 to $5.1
million for the three months ended March 31, 2000, primarily due to a $2.2
million charge for management fees payable to ULA during the three months ended
March 31, 2000 compared to $0.1 million during the three months ended March 31,
1999. VTR's Adjusted EBITDA from its video business increased $1.9 million
(before management fees of $1.8 million) as modest price increases exceeded
expenses. Although revenues from telephone services increased significantly from
the comparable period in 1999, development expenses of this new business
continue to exist. VTR expects these operating and selling, general and
administrative expenses as a percentage of telephone revenue to decline in
future periods because development costs in general will taper off and certain
costs have already been incurred and are fixed in relation to subscriber
volumes.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and
administrative expense increased $46.5 million, from $26.1 million for the three
months ended March 31, 1999 to $72.6 million for the three months ended March
31, 2000. The increase in the three months ended March 31, 2000 was primarily
attributable to a stock-based compensation charge of $68.5 million, compared to
$18.6 million for the same period in 1999. These plans include the UPC phantom
stock option plan, the chello phantom stock option plan, the Austar United stock
option plan and the ULA phantom stock option plan, which continue to require
variable plan accounting. Under this method of accounting, increases in the fair
market value of these shares result in non-cash compensation charges to the
statement of operations for vested options.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
$114.7 million during the three months ended March 31, 2000 compared to the
three months ended March 31, 1999, as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
2000 1999
---------- -----------
(In thousands)
<S> <C> <C>
Europe........................................................... $129,166 $ 32,221
Asia/Pacific..................................................... 30,028 24,468
Latin America.................................................... 12,523 460
Corporate and other.............................................. 381 249
-------- --------
Total depreciation and amortization expense........................... $172,098 $ 57,398
======== ========
</TABLE>
30
<PAGE>
EUROPE. UPC's depreciation and amortization expense in U.S. dollar terms
increased $97.0 million from $32.2 million for the three months ended March 31,
1999 to $129.2 million for the three months ended March 31, 2000. On a
functional currency basis, UPC's depreciation and amortization expense increased
euro102.0 million from euro28.7 million for the three months ended March 31,
1999 to euro130.7 million for the three months ended March 31, 2000. The
increase resulted primarily from acquisitions completed during 1999 in the
Netherlands and Poland, as well as additional depreciation related to additional
capital expenditures to upgrade the network in UPC's Western European systems
and new-build for developing systems.
ASIA/PACIFIC. Austar United's depreciation and amortization expense increased
$5.5 million, or 22.4%, from $24.5 million for the three months ended March 31,
1999 to $30.0 million for the three months ended March 31, 2000, due to a larger
fixed asset base from capital expenditures to meet subscriber growth.
LATIN AMERICA. The increase in the three months ended March 31, 2000 is due to
consolidating the results of operations of VTR effective May 1, 1999.
GAIN ON ISSUANCE OF COMMON EQUITY SECURITIES BY SUBSIDIARIES. In February 1999,
UPC successfully completed an initial public offering selling 133.8 million
shares on the Amsterdam Stock Exchange and Nasdaq, raising gross and net
proceeds at euro9.67 ($10.93) per share of euro1,294.6 ($1,463.0) million and
euro1,207.1 ($1,364.1) million, respectively. Concurrent with the offering, a
subsidiary of DIC exercised its option and acquired approximately 4.7 million
ordinary shares of UPC, resulting in proceeds to UPC of $45.0 million. Based on
the carrying value of our investment in UPC as of February 11, 1999, we
recognized a gain of $825.2 million from the resulting step-up in the carrying
amount of our investment in UPC, in accordance with SAB 51.
In connection with the acquisition of Intercomm France in February 2000, UPC
issued shares worth euro20.2 ($20.0) million. Based on the carrying value of
our investment in UPC as of February 23, 2000, we recognized a gain of $10.3
million from the resulting step-up in the carrying amount of our investment in
UPC, in accordance with SAB 51.
In March 2000, Austar United successfully priced a second public offering
selling 20.0 million shares on the Australian Stock Exchange, raising gross and
net proceeds at A$8.50 ($5.20) per share of A$170.0 ($104.0) million and A$167.5
($102.4) million, respectively. Based on the carrying value of our investment in
Austar United as of March 29, 2000, we recognized a gain of $66.8 million from
the resulting step-up in the carrying amount of our investment in Austar United,
in accordance with SAB 51.
No deferred taxes were recorded related to these gains due to our intent on
holding our investment in UPC and Austar United indefinitely.
INTEREST INCOME. Interest income increased $51.6 million during the three months
ended March 31, 2000 compared to the amounts for the corresponding period in the
prior year. The increase in the three months ended March 31, 2000 was due to
higher cash balances related to the issuance of new debt and equity in late
1999.
INTEREST EXPENSE. Interest expense increased $159.0 million from $56.6 million
during the three months ended March 31, 1999 to $215.6 million during the three
months ended March 31, 2000. This increase was primarily due to the $4.1 billion
of senior notes and senior discount notes issued by UPC from July 1999 through
January 2000, as well as continued accretion of interest on our $1,375.0 million
aggregate principal amount 1998 senior notes and our 1999 senior notes.
GAIN ON SALE OF INVESTMENT IN AFFILIATE. In March 1999, UPC sold its interest in
Telekabel Hungary Programming, recognizing a gain of $7.5 million.
FOREIGN CURRENCY EXCHANGE (LOSS) GAIN. Foreign currency exchange loss increased
$57.4 million from $5.5 million loss for the three months ended March 31, 1999
to $62.9 million loss for the three months ended March 31, 2000, primarily due
to UPC, which has bonds and notes payable that are denominated in U.S. dollars.
31
<PAGE>
MINORITY INTERESTS IN SUBSIDIARIES. The minority interests' share of losses
increased $214.3 million from $12.8 million for the three months ended March 31,
1999 to $227.1 million for the three months ended March 31, 2000. The initial
public offerings of UPC (February 1999) and Austar United (July 1999) and other
share issuances have reduced our ownership from 100% and 98.0% as of December
31, 1998 to 53.0% and 72.3% as of March 31, 2000 for UPC and Austar United,
respectively. For accounting purposes we continue to consolidate 100% of the
results of operations of UPC and Austar United, then deduct the minority
interests' share of income (loss) before arriving at net income (loss). Of the
total increase for the three months ended March 31, 2000, $204.5 million related
to UPC and $9.6 million related to Austar United.
SHARE IN RESULTS OF AFFILIATES. Our share in results of affiliates totaled $22.3
million and $20.6 million for the three months ended March 31, 2000 and 1999,
respectively, as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
2000 1999
--------- ---------
(In thousands)
<S> <C> <C>
Europe:
A2000 (1)................................................................... $ - $ (5,089)
UTH (2)..................................................................... - (2,757)
Tevel....................................................................... (6,381) (2,098)
Melita...................................................................... (264) 5
Monor....................................................................... - (153)
Iberian Programming......................................................... 622 -
SBS......................................................................... (7,002) -
PrimaCom.................................................................... (5,752) -
Other....................................................................... (2,188) (243)
--------- --------
(20,965) (10,335)
--------- --------
Asia/Pacific:
Saturn (3).................................................................. - (1,948)
XYZ Entertainment........................................................... (615) (3,186)
Pilipino Cable Corporation.................................................. 12 (181)
Hunan International TV...................................................... 94 (129)
Other....................................................................... 34 -
-------- --------
(475) (5,444)
-------- --------
Latin America:
VTR (4)..................................................................... - (2,973)
Megapo...................................................................... (60) 157
MGM Networks LA............................................................. (849) (2,038)
Jundiai..................................................................... 90 71
-------- --------
(819) (4,783)
-------- --------
Total share in results of affiliates.......................................... $(22,259) $(20,562)
======== ========
</TABLE>
(1) Effective September 1, 1999, we increased our ownership interest in A2000
from 50.0% to 100% and began consolidating its results of operations.
(2) Effective February 1, 1999 we increased our ownership interest in UTH from
51.0% to 100% and began consolidating its results of operations.
(3) Effective January 1, 1998, we discontinued consolidating the results of
operations of Saturn and returned to the equity method of accounting due to
certain minority shareholder's rights. Effective August 1, 1999, we
increased our ownership interest in Saturn to 100% and began consolidating
its results of operations.
(4) Effective May 1, 1999, we increased our ownership interest in VTR to 100%
and began consolidating its results of operations.
32
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES
We have financed our acquisitions and funding of our video, voice and data
systems in the three main regions of the world in which we operate primarily
through public and private debt and equity as well as cash received from the
sale of non-strategic assets by certain subsidiaries. These resources have also
been used to refinance certain debt instruments and facilities as well as to
cover corporate overhead. The following table outlines the sources and uses of
cash, cash equivalents, restricted cash and short-term liquid investments (for
purposes of this table only, "cash") for United (parent only) from inception to
date:
<TABLE>
<CAPTION>
For the Three
Inception to Months Ended
United (Parent Only) December 31, 1999 March 31, 2000 Total
- -------------------- ----------------- -------------- ------------
(In millions)
<S> <C> <C> <C>
Financing Sources:
Gross bond proceeds.......................................... $1,347.0 $ - $1,347.0
Gross equity proceeds........................................ 1,686.7(1) 2.4 1,689.1
Asset sales, dividends and note payments..................... 319.1 50.8 369.9
Interest income and other.................................... 95.0 21.4 116.4
-------- -------- --------
Total sources........................................... 3,447.8 74.6 3,522.4
-------- -------- --------
Application of Funds:
Investment in:
UPC........................................................ (459.1) - (459.1)
UAP........................................................ (315.6)(1) - (315.6)
ULA........................................................ (623.6) (70.6) (694.2)
Other...................................................... (25.8) - (25.8)
-------- -------- --------
Total................................................... (1,424.1) (70.6) (1,494.7)
Repayment of bonds........................................... (532.1)(2) - (532.1)
Offering costs............................................... (102.2) - (102.2)
Corporate equipment and development.......................... (31.0) - (31.0)
Corporate overhead and other................................. (122.6) (5.6) (128.2)
-------- -------- --------
Total uses.............................................. (2,212.0) (76.2) (2,288.2)
-------- -------- --------
Period change in cash........................................ 1,235.8 (1.6) 1,234.2
Cash, beginning of period.................................... - 1,235.8 -
-------- -------- --------
Cash, end of period.......................................... $1,235.8 $1,234.2 1,234.2
======== ======== --------
United's Subsidiaries
- ---------------------
Cash, end of period:
UPC............................................................ 707.8
UAP............................................................ 240.9
ULA............................................................ 2.6
Other..................................... ................. 1.4
--------
Total United's subsidiaries............................ 952.7
--------
Total consolidated cash, cash equivalents, restricted cash
and short-term liquid investments..................... $2,186.9
========
</TABLE>
(1) Includes issuance/use of $29.8 million and $29.5 million in convertible
preferred stock in 1995 and 1998, respectively, to acquire interests in
Australia as well as $50.0 million in common stock in 1995 to acquire the
initial interest in UPC.
(2) Includes tender premium of $65.6 million.
33
<PAGE>
UNITED PARENT. We had $1,234.2 million of cash, cash equivalents, restricted
cash and short-term liquid investments on hand as of March 31, 2000. Additional
sources of cash through 2000 may include the raising of additional private or
public debt and/or equity and/or the receipt of sales proceeds from the
disposition of non-strategic assets by certain subsidiaries. Uses of cash in the
next year will include continued funding to the Latin America region to meet the
existing growth plans of our systems in that region and corporate overhead. We
do not expect to contribute additional capital to UPC and Austar United for
their ongoing operating or development requirements, as they will finance their
operating systems and development opportunities with their operating cash flow
and debt and equity financings. We estimate approximately $141.8 million of
United Parent funding will be required by systems in the Latin America region
during 2000. We believe that our existing capital resources will enable us to
assist in satisfying the operating and development requirements of our other
subsidiaries and to cover corporate overhead for the remainder of the year. To
the extent we pursue new acquisitions or development opportunities, we will need
to raise additional capital or seek strategic partners. Because we do not
currently generate positive operating cash flow, our ability to repay our
long-term obligations will be dependent on developing one or more additional
sources of cash.
UPC. UPC had $707.8 million in cash, cash equivalents, restricted cash and
short-term liquid investments on hand as of March 31, 2000. In January 2000, UPC
completed a $1.6 billion bond offering consisting of $600.0 million and
euro200.0 million of ten-year 11.25% Senior Notes due 2010, $300.0 million of
ten-year 11.5% Senior Notes due 2010 and $1.0 billion aggregate principal amount
of ten-year 13.75% Senior Discount Notes due 2010. The Senior Discount Notes
were sold at 51.2% of the face amount yielding gross proceeds of $512.2 million
and will accrue but not pay interest until 2005. In March 2000, UPC closed a
euro2.0 ($1.9) billion stand-by revolving bank facility with one of its core
banks. When drawn, the facility will bear interest at EURIBOR + 5.0%. Proceeds
from these debt offerings and UPC's existing facilities are expected to be used
primarily for acquisitions, capital expenditures and other costs associated with
UPC's network upgrade and the continued development of UPC's telephone and
Internet/data services businesses. UPC may need to raise additional capital in
the future to the extent UPC pursues additional acquisitions or development
opportunities or if cash flow from operations is insufficient to satisfy UPC's
liquidity requirements.
UAP. UAP had $240.9 million of cash, cash equivalents and short-term liquid
investments on hand as of March 31, 2000. On March 29, 2000, Austar United
successfully priced a second public offering selling 20.0 million shares on the
Australian Stock Exchange, raising gross and net proceeds at A$8.50 ($5.20) per
share of A$170.0 ($104.0) million and A$167.5 ($102.4) million, respectively.
These proceeds, which were received in April, in addition to borrowing capacity
on the New Austar Bank Facility and Saturn Bank Facility, will be used to expand
Austar United's customer base, complete the build-out of its network and
introduce new services such as telephone and Internet/data.
ULA . ULA had $2.6 million of cash, cash equivalents, restricted cash and
short-term liquid investments on hand as of March 31, 2000. ULA's systems, which
are at various stages of construction and development, will generally depend on
funding from us and project financing to meet their growth needs. ULA's Chilean
system, VTR, has capacity for borrowing under the VTR Bank Facility as of March
31, 2000. With this facility and positive operating cash flow, the business
needs an additional $90.1 million from us through 2000 to continue to grow its
telephone business. ULA anticipates continued nominal funding from us for Latin
America programming and projects in Brazil, Mexico and Peru. To the extent ULA
pursues additional acquisitions or development opportunities, ULA will need to
raise additional capital or seek strategic partners.
34
<PAGE>
STATEMENTS OF CASH FLOWS
We had cash and cash equivalents of $1,581.4 million as of March 31, 2000, a
decrease of $344.5 million from $1,925.9 million as of December 31, 1999. Cash
and cash equivalents of $607.5 million as of March 31, 1999 represented an
increase of $571.9 million from $35.6 million as of December 31, 1998.
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------------------------
2000 1999
----------- ----------
(In thousands)
<S> <C> <C>
Cash flows from operating activities............................................. $ (40,035) $ 8,388
Cash flows from investing activities............................................. (1,919,647) (369,032)
Cash flows from financing activities............................................. 1,717,436 958,352
Effect of exchange rates on cash................................................. (102,297) (25,826)
---------- --------
Net increase in cash and cash equivalents........................................ (344,543) 571,882
Cash and cash equivalents at beginning of period................................. 1,925,915 35,608
---------- --------
Cash and cash equivalents at end of period....................................... $1,581,372 $607,490
========== ========
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000
Principal sources of cash during the three months ended March 31, 2000 included
$1,612.2 million in proceeds from the issuance of senior notes and senior
discount notes by UPC, $423.9 million of borrowings on various subsidiary
facilities, $6.5 million from the exercise of stock options and $48.9 million
from affiliate dividends and other investing and financing sources.
Principal uses of cash during the three months ended March 31, 2000 included
$1,006.0 million for the acquisition of the K&T Group in The Netherlands, $335.4
million for other acquisitions, $300.6 million of capital expenditures for
system upgrade and new-build activities, $293.8 million for repayments of debt,
$160.6 million for an additional investment in SBS, $144.1 million of other
investments in affiliates, $102.3 million negative exchange rate effect on cash,
$31.4 million for deferred financing costs, $21.9 million of net cash invested
in short-term liquid investments and $39.9 million for operating activities and
other investing and financing uses.
THREE MONTHS ENDED MARCH 31, 1999
Principal sources of cash during the three months ended March 31, 1999 included
$1,414.0 million in proceeds from UPC's initial public offering and DIC's
exercise of its option to acquire shares in UPC, $275.3 million of borrowings on
the UTH Facility, $99.7 million of borrowings on the UPC Senior Revolving Credit
Facility, $38.3 million of other borrowings by our operating companies in
France, Hungary and Australia, $30.8 million from the issuance of our and UPC's
equity securities, $18.7 million of proceeds from the sale of our Hungarian
programming assets, $14.3 million from the release of restricted cash upon the
repayment of the UPC Bridge Bank Facility and other releases and $9.5 million
from operating activities and other investing and financing sources.
Principal uses of cash during the three months ended March 31, 1999 included
$252.0 million for the acquisition of the additional 49.0% interest in UTH, net
of cash acquired, $318.8 million for the repayment of the existing facility at
UTH, $316.1 million for the repayment of a portion of the UPC Senior Revolving
Credit Facility, $139.9 million for the repayment of other loans, $92.0 million
of capital expenditures for system upgrade and new-build activities, $56.1
million for the repayment of the UPC Bridge Bank Facility, $45.0 million for the
repayment of a portion of the DIC Loan, a deposit of $41.0 million for the
acquisition of GelreVision, $25.8 million negative exchange rate effect on cash,
$18.5 million for payment of the Time Warner Note, $12.6 million of funding to
our affiliates, $5.6 million for the net change in short-term investments and
$5.3 million for other investing and financing uses.
35
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INVESTMENT PORTFOLIO
We do not use derivative financial instruments in our non-trading investment
portfolio. We place our cash and cash equivalent investments in highly liquid
instruments that meet high credit quality standards with original maturities at
the date of purchase of less than three months. We also place our short-term
investments in liquid instruments that meet high credit quality standards with
original maturities at the date of purchase of between three and twelve months.
We also limit the amount of credit exposure to any one issue, issuer or type of
instrument. These investments are subject to interest rate risk and will fall in
value if market interest rates increase. We do not expect, however, any material
loss with respect to our investment portfolio.
IMPACT OF FOREIGN CURRENCY RATE CHANGES
We are exposed to foreign exchange rate fluctuations related to our operating
subsidiaries' monetary assets and liabilities and the financial results of
foreign subsidiaries when their respective financial statements are translated
into U.S. dollars during consolidation. Our exposure to foreign exchange rate
fluctuations also arises from intercompany charges such as the cost of
equipment, management fees and certain other charges that are denominated in
U.S. dollars but recorded in the functional currency of the foreign subsidiary.
In addition, certain of our operating companies have notes payable and notes
receivable which are denominated in a currency other than their own functional
currency, as follows:
<TABLE>
<CAPTION>
Amount Outstanding
as of March 31, 2000
--------------------
(In thousands)
<S> <C>
U.S. Dollar Denominated Facilities:
Stjarn Seller's Note due 2000 (1)........................................... $ 100,000
UPC 12.5% Senior Discount Notes due 2009 (1)................................ 434,443
UPC 13.375% Senior Discount Notes due 2009.................................. 263,939
UPC 13.75% Senior Discount Notes due 2010 (1)............................... 525,754
UPC 11.25% Senior Notes due 2010 (1)........................................ 595,115
@Entertainment Senior Discount Notes (1)................................... 270,932
UPC DIC Loan (1)............................................................ 42,108
VTR Bank Facility (2)....................................................... 176,000
Intercompany Loan to VTR (2)................................................ 125,000
----------
$2,533,291
==========
</TABLE>
- -----------------
(1) Functional currency is Euros.
(2) Functional currency is Chilean Pesos.
Occasionally we will execute hedge transactions to reduce our exposure to
foreign currency exchange rate risk. In connection with UPC's offering of senior
notes in July 1999, October 1999 and January 2000, UPC entered into
cross-currency swap agreements, exchanging dollar-denominated notes into Euro
denominated notes.
INTEREST RATE SENSITIVITY
The table below provides information about our primary debt obligations. The
variable rate financial instruments are sensitive to changes in interest rates.
The information is presented in U.S. dollar equivalents, which is our reporting
currency.
36
<PAGE>
<TABLE>
<CAPTION>
As of March 31, 2000 Expected payment as of December 31,
----------------------- ----------------------------------------------------------------------------
Book Value Fair Value 2000 2001 2002 2003 2004 Thereafter Total
---------- ---------- --------- --------- -------- -------- --------- ---------- ------------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate United USD
1998 Notes................. $1,017,868 $ 952,188 $ - $ - $ - $ - $ - $1,017,868 $1,017,868
Average interest rate... 10.75% 11.79%
Fixed rate United USD
1999 Notes.................. $ 230,419 $ 218,082 $ - $ - $ - $ - $ - $ 230,419 $ 230,419
Average interest rate... 10.875% 12.29%
Fixed rate UPC USD
Senior Notes due 2009 ...... $ 725,689 $ 738,838 $ - $ - $ - $ - $ - $ 725,689 $ 725,689
Average interest rate... 10.875% 12.14%
Fixed rate UPC Euro
Senior Notes due 2009....... $ 288,462 $ 272,596 $ - $ - $ - $ - $ - $ 288,462 $ 288,462
Average interest rate... 10.875% 11.86%
Fixed rate UPC USD Senior
Discount Notes due 2009..... $ 434,443 $ 363,860 $ - $ - $ - $ - $ - $ 434,443 $ 434,443
Average interest rate... 12.50% 14.85%
Fixed rate UPC USD
Senior Notes due 2007....... $ 183,325 $ 193,039 $ - $ - $ - $ - $ - $ 183,325 $ 183,325
Average interest rate... 10.875% 11.68%
Fixed rate UPC Euro
Senior Notes due 2007....... $ 96,154 $ 93,269 $ - $ - $ - $ - $ - $ 96,154 $ 96,154
Average interest rate... 10.875% 11.48%
Fixed rate UPC USD
Senior Notes due 2009....... $ 229,209 $ 236,903 $ - $ - $ - $ - $ - $ 229,209 $ 229,209
Average interest rate... 11.25% 12.33%
Fixed rate UPC Euro
Senior Notes due 2009....... $ 96,429 $ 93,474 $ - $ - $ - $ - $ - $ 96,429 $ 96,429
Average interest rate... 11.25% 11.91%
Fixed rate UPC USD Senior
Discount Notes due 2009..... $ 263,939 $ 234,242 $ - $ - $ - $ - $ - $ 263,939 $ 263,939
Average interest rate... 13.375% 14.93%
Fixed rate UPC Euro Senior
Discount Notes due 2009..... $ 101,490 $ 96,418 $ - $ - $ - $ - $ - $ 101,490 $ 101,490
Average interest rate... 13.375% 14.04%
Fixed rate UPC USD
Senior Notes due 2010....... $ 595,115 $ 573,055 $ - $ - $ - $ - $ - $ 595,115 $ 595,115
Average interest rate... 11.25% 12.03%
Fixed rate UPC Euro
Senior Notes due 2010....... $ 190,897 $ 195,019 $ - $ - $ - $ - $ - $ 190,897 $ 190,897
Average interest rate... 11.25% 11.68%
Fixed rate UPC USD
Senior Notes due 2010....... $ 283,427 $ 286,528 $ - $ - $ - $ - $ - $ 283,427 $ 283,427
Average interest rate... 11.50% 12.29%
Fixed rate UPC USD Senior
Discount Notes due 2010..... $ 525,754 $ 490,047 $ - $ - $ - $ - $ - $ 525,754 $ 525,754
Average interest rate... 13.75% 14.65%
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
As of March 31, 2000 Expected payment as of December 31,
----------------------- ----------------------------------------------------------------------------
Book Value Fair Value 2000 2001 2002 2003 2004 Thereafter Total
---------- ---------- --------- --------- -------- -------- --------- ---------- ------------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate United
USD A/P Notes............... $ 421,895 $ 452,205 $ - $ - $ - $ - $ - $ 421,895 $ 421,895
Average interest rate.... 14.00% 12.13%
Variable rate UPC
NLG Senior Credit
Facility.................... $ 469,781 $ 469,781 $ - $ - $ 42,141 $74,919 $ 93,648 $ 259,073 $ 469,781
Average interest rate.... 6.31% 6.31%
Variable rate Telekabel
Euro Facility............... $ 249,091 $ 249,091 $ 32,507 $ - $ 12,260 $24,519 $ 49,038 $ 130,767 $ 249,091
Average interest rate.... 5.50% 5.50%
Variable rate A2000
NLG Facilities.............. $ 222,527 $ 222,527 $222,527 $ - $ - $ - $ - $ - $ 222,527
Average interest rate.... 4.80% 4.80%
Variable rate CNBH
NLG Facility................ $ 115,883 $ 115,883 $ - $3,462 $ 8,077 $15,000 $ 20,769 $ 68,575 $ 115,883
Average interest rate.... 5.00% 5.00%
Variable rate Rhone
Vision Cable FFR
Credit Facility............. $ 58,615 $ 58,615 $ 58,615 $ - $ - $ - $ - $ - $ 58,615
Average interest rate.... 4.4% 4.4%
Variable rate RCF
FFR Facility................ $ 30,427 $ 30,427 $ 30,427 $ - $ - $ - $ - $ - $ 30,427
Average interest rate.... 4.9% 4.9%
Fixed rate UPC
USD DIC Loan................ $ 42,108 $ 42,108 $ 42,108 $ - $ - $ - $ - $ - $ 42,108
Average interest rate.... 8.00% 8.00%
Variable rate
Mediareseaux FFR
Facility.................... $ 51,268 $ 51,268 $ 51,268 $ - $ - $ - $ - $ - $ 51,268
Average interest rate.... 5.42% 5.42%
Variable rate Videopole
FFR Facility................ $ 7,327 $ 7,327 $ 7,327 $ - $ - $ - $ - $ - $ 7,327
Average interest rate.... 4.8% 4.8%
Stjarn Seller's Note......... $ 100,000 $ 100,000 $100,000 $ - $ - $ - $ - $ - $ 100,000
Average interest rate.... 8.0% 8.0%
Variable rate VTR
USD Bank Facility........... $ 176,000 $ 176,000 $ - $ - $176,000 $ - $ - $ - $ 176,000
Average interest rate.... 11.41% 11.41%
Variable rate Austar
A$ New Austar Bank
Facility.................... $ 201,530 $ 201,530 $ - $ - $ 7,054 $93,330 $ 89,319 $ 11,827 $ 201,530
Average interest rate.... 7.9% 7.9%
Variable rate Saturn
NZ$ Saturn Bank Facility.... $ 56,943 $ 56,943 $ - $ 569 $ 4,555 $ 8,200 $ 11,389 $ 32,230 $ 56,943
Average interest rate.... 7.4% 7.4%
Fixed rate @Entertainment
Senior Discount Notes....... $ 270,932 $ 270,932 $ - $ - $ - $16,226 $ - $ 254,706 $ 270,932
Average interest rate.... 7.0%-14.50% 7.0%-14.50%
---------- ---------- -------- ------ -------- -------- -------- ---------- ----------
$7,736,947 $7,542,195 $544,779 $4,031 $250,087 $232,194 $264,163 $6,441,693 $7,736,947
========== ========== ======== ====== ======== ======== ======== ========== ==========
</TABLE>
38
<PAGE>
We use interest rate swap agreements from time to time, to manage interest rate
risk on our floating rate debt facilities. Interest rate swaps are entered into
depending on our assessment of the market, and generally are used to convert the
floating rate debt to fixed rate debt. Interest differentials paid or received
under these swap agreements are recognized over the life of the contracts as
adjustments to the effective yield of the underlying debt, and related amounts
payable to, or receivable from, the counterparties are included in the
consolidated balance sheet.
INFLATION AND FOREIGN INVESTMENT RISK
Certain of our operating companies operate in countries where the rate of
inflation is extremely high relative to that in the United States. While our
affiliated companies attempt to increase their subscription rates to offset
increases in operating costs, there is no assurance that they will be able to do
so. Therefore, operating costs may rise faster than associated revenue,
resulting in a material negative impact on reported earnings. We are also
impacted by inflationary increases in salaries, wages, benefits and other
administrative costs, the effects of which to date have not been material.
Our foreign operating companies are all directly affected by their respective
countries' government, economic, fiscal and monetary policies and other
political factors. We believe that our operating companies' financial conditions
and results of operations have not been materially adversely affected by these
factors.
39
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
On April 29, 2000, the 10th Circuit Court of Appeals affirmed the 1997 jury
verdicts in favor of the Company in its lawsuit against The Wharf Holdings
(Ltd.), its wholly-owned subsidiary, Wharf Communications Limited, and Wharf
Holding's deputy chairman, Stephen Ng. The Company was awarded $67.0 million in
compensatory damages for its claims of fraud, breach of fiduciary duty, breach
of contract and negligent misrepresentation, and $58.5 million in punitive
damages. The Court also awarded prejudgment interest of $28.2 million. The
judgments, with accrued interest, total over $186.0 million.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
10.1 Amendment Agreement, dated as of April 11, 2000, by and between
UPC and SBS Broadcasting S.A. (1)
10.2 Memorandum of Understanding between chello broadband N.V. and
VTR.
27.1 Financial Data Schedule
-------------------
(1) Incorporated by reference from UPC's Form 8-K dated April 11, 2000
(File No. 000-25365)
(b) Reports on Form 8-K filed during the quarter
<TABLE>
<CAPTION>
Date of Filing Date of Event Item Reported
-------------- ------------- -------------
<S> <C> <C>
January 11, 2000 December 30, 1999 Item 5 - Corrected Certificate of Designation
for the 7.0% Series D Senior Cumulative
Convertible Preferred Stock and a Corrected
Certificate of Designation for the 7.0% Series
C Senior Cumulative Preferred Stock.
</TABLE>
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 15th day of May,
2000.
UnitedGlobalCom, Inc.
a Delaware corporation
By: /s/ Valerie L. Cover
--------------------------------
Valerie L. Cover
Controller and Vice President
(a Duly Authorized Officer and
Principal Financial Officer)
41
EXHIBIT 10.2
Memorandum of Understanding between
chello broadband N.V. ("chello") and VTR GlobalCom, S.A. ("VTR")
1. The
"Territory" Every home and place of business connected to VTR's network
which currently meets network quality standards as well as
homes and businesses to be upgraded in accordance to the
upgrade schedule.
2. Term 7 years, automatically renewed in 3 year periods unless one
party notifies the other to the contrary 6 months prior to
the renewal date, subject to a shorter term if regulatory
requirements so mandate.
3. The "Services" Broadband IP services (excluding voice "IP Telephony" and
dial up internet) delivered by via VTR network to a PC or
internet access services delivered to a TV.
4. Exclusivity
obligations
of chello
and VTR chello will have exclusivity rights to offer the Service
through VTR's network across the Territory for the duration
of the term. VTR will be the sole exclusive provider of
chello within the Territory. In Chile, but outside the
Territory, chello will not, in an exclusive fashion, create
any agreement nor associate their brand with any other
company as long as VTR abides by its network upgrade plan.
chello will not provide services that compete within reason
of VTR's Telephony and Cable TV core businesses. VTR will
not undertake any service that competes within reason of
chello's broadband internet services. chello will have the
"right of last refusal" on a "most favored nations" status
for any new IP based service via VTR's network which is not
included in the definition of Services, including voice over
IP if such a service would not compete with VTR's cable
telephony offering. chello will have a right of first offer
within 30 days and last refusal within 90 days to provide
these services with VTR.
5. Franchising
Fees VTR will pay chello Franchise fees calculated in the
following manner:
o Residential access subscription fees, including rental
fees for customer premise equipment based on amounts
billed: 60% VTR, 40% chello. Non-premium business
access subscription fees, including rental fees for
customer premise equipment based on amounts billed: 60%
VTR, 40% chello. Fees for premium business access
services will be agreed between the parties as they are
introduced. End-use subscriptions access fees levels
shall be set by VTR, within the price ranges set
annually by chello, which cannot be lower than VTR's
costs unless mutually agreed.
o All other international fees (advertising, e-commerce,
etc.), regarding international content based on
revenues retained by chello: 10% VTR, 90% chello.
o Set-up fees, including installation of customer premise
equipment based on amounts billed: 90% VTR, 10% chello.
<PAGE>
6. Local Content
Development Both parties agree to create a 50/50 JV, prior to launch of
business to develop local content for the Chilean portal to
be used to offer the Services. All this Content developed in
this JV will be offered on a "most favored nation" status to
chello broadband N.V. for use outside Chile.
7. Network Upgrade
Plan and Network
and Content
Quality Both parties commit to comply with Service Legal Agreement
("SLA") to be defined prior to launch of business. In case
of SLA breach, 90 days will be allowed within reason for
corrective measures by other party with an extension of 30
additional days for final rectification.
8. IP Backbone chello commits to offer initially 6 Mbps exclusive for Chile
as soon as VTR migrates 1500 subs to the Service. chello
commits to provide sufficient backbone capacity to ensure
high speed standards established in SLA at minimum 2 Kbps
per user.
9. IP End-to-End
Management chello intends reviewing the management of the IP layer from
head end to customer premises. chello will implement
end-to-end management if it is preferable for the delivery
of Services, on a basis to be agreed between the parties.
10. Customer Data VTR and chello will share all information which is needed to
offer the Services.
11. Billing VTR will send and collect bills. chello will send billing
data to VTR for integrating same into its billing system.
12. Customer Care VTR will establish an end-user help desk to answer questions
concerning relevant services and interface with chello's
technical support for technical questions it is unable to
answer. The SLA will provide further details regarding
Customer Care.
13. Customer
Acquisitions
and Retention chello will undertake Global and Regional sales and
marketing activities. VTR will undertake local and national
sales and marketing activities. chello commits to contribute
equal amounts that VTR spends on local and national
marketing to promote the Service subject to limits to be
agreed. chello will grant licensing to VTR to use chello
trade marks, service marks and logos. This licensing will be
restricted to activities that are approved by chello. All
materials prepared by VTR will conform to the "Brand Use
Guidelines" established by chello. The Services will be
associated with both VTR and chello brands.
<PAGE>
14. Existing
Customers VTR will use "best effort" to migrate all existing customers
serviced by VTR from competitive services within 3 months of
signing the franchising agreement.
15. Local laws Terms of this MOU are subject to local Chilean laws which
supersede any term in case of discrepancy.
16. Launch of
Business chello commits to launch the Service in less than 120 days
from the signing of this MOU as long as the parties reach an
agreement on the SLA under reasonable assumptions. Business
launch considers Billing, IP Management and International
Backbone implementation, first phase Staffing, and Training
of content established in Chile.
For VTR GlobalCom, S.A. For chello broadband N.V.
------------------------- -------------------------
/s/ Juan Vasquez /s/ Fares Nassar
Date: February 22, 2000 Date: February 11, 2000
------------------- -----------------
For VTR GlobalCom, S.A.
-------------------------
/s/ James E. Szurek, Jr.
-------------------------
Date: February 11, 2000
-------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNITEDGLOBALCOM, INC.'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,598,656
<SECURITIES> 588,211
<RECEIVABLES> 137,953
<ALLOWANCES> 39,438
<INVENTORY> 109,069
<CURRENT-ASSETS> 2,746,621
<PP&E> 3,367,584
<DEPRECIATION> 580,987
<TOTAL-ASSETS> 10,461,356
<CURRENT-LIABILITIES> 1,256,439
<BONDS> 7,424,560
26,872
691,367
<COMMON> 1,523,396
<OTHER-SE> (1,323,791)
<TOTAL-LIABILITY-AND-EQUITY> 10,461,356
<SALES> 281,856
<TOTAL-REVENUES> 281,856
<CGS> 190,178
<TOTAL-COSTS> 406,342
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,581
<INCOME-PRETAX> (450,452)
<INCOME-TAX> 664
<INCOME-CONTINUING> (244,938)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (244,938)
<EPS-BASIC> (2.70)
<EPS-DILUTED> (2.70)
</TABLE>
